Binance unveils its proof of reserves mechanism

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  • Binance’s proof of reserves system is initially showing results for the flagship cryptocurrency Bitcoin.
  • The crypto exchange will add other tokens and networks and implement ZK-SNARKs.
  • Crypto exchanges want to show they have the assets they should after the shocking collapse of FTX.

Binance has published its proof-of-reserve (PoR) system, days after CEO Changpeng Zhao promised to trigger the mechanism following the collapse of rival FTX.

The bankruptcy and contagion that followed crashed the market, with the Binance Coin price falling to a low of $250. Bitcoin’s price also fell below $16,000, reaching its lowest level since 2020.

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In response, multiple exchanges had released a snapshot of their asset reserves. But the crypto community largely noted that the snapshot of the assets alone was not enough – there was a need to have the exchange’s liabilities available as well.

Binance’s proof of reserves showed a ratio of 101%

In its update on the issue, Binance noted that its users can now verify the exchanges. As for what’s possible now, Binance has announced that the mechanism will initially support Bitcoin. The exchange will try to add other tokens and networks in the coming weeks.

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Binance will also enable the verification of Proof of Reserve results by third party auditors and implement ZK-SNARKs to bolster privacy and robustness.

Because Binance offers margin and loan services, the audit results show each user’s net balance, equity and debt, where net balance = equity – debtthe Binance team wrote.

A snapshot taken on November 22, 2022 at 23:59 (UTC) shows that Binance’s on-chain Bitcoin balances were 582,485,9302, while the customer’s net balance was 575,742,4228. The snapshot reserve ratio was 101%, with a margin of 6,743 BTC.

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Binance clients can check if the exchange is holding their crypto as it should.

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