Nic Carter, a well-known cryptocurrency advocate, recently conducted a comprehensive analysis of several centralized cryptocurrency exchanges’ Proof-of-Reserves (PoR).
In his analysis, he evaluated the quality of each exchange’s PoR by considering factors such as attestation to assets held, disclosure of liabilities, and the use of a third-party auditor.
According to the publication, Kraken and BitMEX had the highest quality PoR. Carter particularly commended Kraken for using Armanino as a third-party auditor and for its commitment to conducting PoR every six months. Carter stated that these factors provide clients with a “good level of confidence” that there are no hidden liabilities at Kraken.
Unlike Kraken, which used a third-party auditor, BitMEX opted for a more transparent approach by publicly listing all of its BTC balances held by the exchange and providing proof that they are spendable by the BitMEX multisig.
In terms of disclosing its liabilities, BitMEX also took a transparent approach by publishing the full Merkle tree of user balances. This level of transparency allows anyone to thoroughly verify the liability set in full, ensuring that there are no issues with excluded or negative balances.
On the other hand, Carter scored Binance low marks in terms of its PoR. He contended that Binance’s low PoR score is due to the fact that the PoR itself is incomplete, making it difficult to accurately assess the percentage of assets that the exchange holds in reserve.
Despite Binance CEO Changpeng Zhao (CZ) emphasizing the importance of PoRs in the wake of the FTX collapse, Carter believes that CZ “hasn’t yet risen to his own challenge” in ensuring the completeness and accuracy of Binance’s PoR.
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