Binance launches proof-of-reserves system for BTC holdings
Cryptocurrency Exchange Company Binance released a new which explains its proof of-reserves system. The company will start with BTC reserves. Right now, Binance has a reserve ratio of 101%. This means that the company has enough Bitcoins to cover all users’ balances.
This move comes just a few weeks after the collapse at FTX ,, another popular crypto exchange. The company was facing a liquidity crisis in the case of FTX. It couldn’t meet the demand of investors and end-users, so it stopped processing withdrawals.
Crypto exchanges and companies that deal with crypto currencies have been trying to be transparent about user funds ever since. This means sharing more information about cold and hot wallets. There is still much to be done before crypto exchanges and their handling of funds can be trusted.
Binance began sharing wallet addresses containing billions of dollars in crypto assets a few weeks ago. The company proved that it has a lot of assets and can process tons of withdrawals with this move. However, the company did not specify whether these assets were user assets or Binance’s balance sheet or a combination of both.
Binance clarified this point today with a new proof-of reserves site. Binance stated that the proof-of reserves system does not include Binance’s funds in BTC wallets.
” It is important to remember that this does NOT include Binance’s corporate holdings which are kept on a separate ledger,” the company states. Binance’s word will be trusted, as it is impossible to verify with a blockchain explorer.
Binance starts with BTC holdings. It is simple to add up the amounts in each Binance wallet. The company uses a Merkle tree to collect all user accounts and generate a cryptographic stamp.
As of November 22nd at 23: 59 UTC, Binance users collectively held 575742. 4228 Bitcoin — This is approximately $9.5 billion at today’s exchange rate. Binance had enough bitcoins in its wallets to cover 101% these funds. Binance would have enough BTC for all withdrawals if everyone withdraws their BTC simultaneously.
Individual users can check if their accounts are included in the snapshot user balances by using the Merkle tree. Binance claims it includes user balances from multiple products, including Spot, Funding and Margin, Futures, Earn, Options Wallet, and Futures. A short Python script is also available from Binance to help you check your own balances.
” Given recent events, it is clear that the community will demand much more from crypto exchanges than what is currently required by traditional financial institutions. We are pleased to offer this new feature to our users to verify funds,” Changpeng Zhao, Binance CEO, stated in a statement. “Binance’s user base is exponentially more than the next largest exchange. This is a huge undertaking and it will take several weeks to create the data for the majority our assets in custody. We are working to get the next update out as quickly as possible to meet the community’s expectations.”
The company plans to release similar proof of reserve information for ETH and USDT, USDC, BUSD, and BNB in future. Binance offers hundreds upon hundreds of crypto assets, so let’s all hope they can cover withdrawals for lesser-known cryptocurrencies.
The company should also work with independent security and financial auditing firms to ensure that you are not blindly trusting the company. Although there is still much to be done, the new proof-of reserve system is a good start.
I’m a journalist who specializes in investigative reporting and writing. I have written for the New York Times and other publications.