The crypto industry is currently under general suspicion of not correctly managing and misappropriating the funds (FIAT and Crypto) deposited by customers. As a result, many exchanges, brokers, and lenders do not have enough funds to pay out their customers. Most recently, Bitpanda, regulated in Austria and Germany, had its reserves audited by KPMG. Now the world’s largest crypto platform Binance is also disclosing a Proof of Reserves (PoR).
According to Binance, Proof of Reserves refers to assets it holds in custody for users. Binance claims that they are now showing evidence and proof that Binance has funds that cover all of our users’ assets 1:1, as well as some reserves. When a user deposits one Bitcoin, Binance‘s reserves increase by at least one Bitcoin to ensure client funds are fully backed. It is important to note that this does not include Binance’s corporate holdings, which are kept on a separate ledger.
To show that Binance has all user assets 1:1, we have built and implemented the Merkle tree to allow people to verify their assets within the platform. Binance’s goal is that every user will be able to verify their asset holdings using their own generated Merkle hash/record ID. This way, people can confirm that their funds are held 1:1, and they can have it verified by a third-party audit agency.