New PoR System Lets Binance Users Audit Their Assets
Binance users are now able to audit their tokens with the new Proof-of-Reserves (PoR) system released Friday. The PoR system aims to provide transparency on user assets in the wake of the recent FTX debacle.
Binance Implements a Cryptographic Tool to Allow Users to Verify Funds
Binance launched a Proof-of-Reserves (PoR) system Friday that allows users to audit their token holdings. The move comes amid Binance’s efforts to provide transparency on user funds and allow users to see the crypto exchange’s reserves. The feature will initially offer insight into Bitcoin reserves, with plans to add more tokens in the coming weeks.
The PoR system uses a Merkle tree, a cryptographic tool that allows users to verify their funds on-chain. Users can do this using their “own generated Merkle hash/record ID” with which they can ensure that their assets “are held 1:1 and they can have it verified by a third-party audit agency.”
To verify transactions, users can choose the audit date they are interested in. Then, they will see a confirmation of the audit type, as well as their own Record ID, covered assets, and asset balances at the time of the audit.
In the announcement, Binance posted a snapshot of its own bitcoin reserves and account balances. The world’s number one crypto exchange holds 582,485 bitcoin in its reserves, compared to 575,742 bitcoin held by its users.
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Binance Expands Transparency on User Funds After FTX Crash
Binance’s PoR system follows the recent collapse of rival crypto exchange FTX, which has had a far-reaching impact on the crypto industry so far. The crypto exchange has reportedly used user funds to cover the liabilities of its sister firm Alameda Research.
The aim of the PoR system is to show that Binance holds user assets in the same tokens they have initially deposited. According to the official post, “when a user buys one bitcoin token, Binance buys one bitcoin token and holds that specific token until the user decides to sell or swap it for another asset.”
The crypto bourse also said it has zero debt and keeps a Secure Asset Fund for Users (SAFU) fund for emergency circumstances.
Do you think every crypto exchange should launch a Proof of Reserves system? Let us know in the comments below.