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Proof-of-Reserves has become a popular trend in the crypto community after the FTX crisis.

Proof-of-Reserves has become a popular trend in the crypto community after the FTX crisis.

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Answer Proof-of-Reserves has become a popular trend in the crypto community after the FTX crisis.

The collapse of FTX, once one of the leading cryptocurrency exchanges, sent shock waves through the cryptocurrency space.

With the issue of liquidity being a major factor in the FTX crisis, the concept of proof of reserve has swept the crypto sector, with more exchanges preparing to show more transparency to their users.

Cryptocurrency exchange Gate.io explained:

What is reserve proof?

Reserve proof is an audit by a third party to ensure that the custodian is holding the assets he claims to own.

All existing balances are snapshot and aggregated into the Merkle Tree, a privacy-friendly data structure of credits.

Read:Learn about…the most prominent crypto-rich people who were on the Forbes Rich List

As a data structure, the Merkle tree, or hash tree, prompts data verification and synchronization.

Therefore, the Merkle tree uses hash functions for data integrity and transparency purposes.

CZ, the CEO of Binance, encouraged the direction of reserve proof after noting that Binance will file a transparency report on its digital asset holdings, telling in this regard:

All cryptocurrency exchanges must demonstrate the reserve through the Merkle Tree.

Banks operate on fractional reserves.

It should not be for cryptocurrency trading platforms.

Binance will start doing reserve proofing soon to provide complete transparency.

Binance has published its latest evidence of assets, which includes more than 125,000 Bitcoin, 9,900 Ethereum and 1.25 billion Tether.

Meanwhile, Crypot.com has told Crypot.com that it will publish its audited guide to the reserve, the company’s CEO said in a tweet, noting that transparency is more important than ever at this critical moment for the industry.

Negative news is starting to hit FTX based on its lack of transparency in crypto reserves.

Read:Ethereum is nearing $5,000 and transaction fees are skyrocketing

Therefore, reserve proof seeks to inform the general public, especially depositors, whether or not deposits match user balances.

Lucas Nuzzi, head of research and development and CoinMetrics, acknowledged that FTX’s rescue of its Alameda research arm has negatively impacted the FTX platform.

Read also:

The crypto market is facing a series of events and the possibility of further decline in the future, according to “JP Morgan”

Billions exit cryptocurrency exchanges after the FTX crisis


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