Bitget Demonstrates Continuous User Assets Growth with April 2024 Proof of Reserves Update

PoR demonstrates an institution / exchange’s ability to honor withdrawals from its platform at all times. Broadly, it consists of two parts – a current record of customers’ token deposits (known as liabilities), and a pool of tokens held within a set of exchange addresses (also known as assets). As a custodial financial institution, centralized exchanges are not supposed to be utilizing customers’ funds for other purposes, thus both assets and liabilities should match. During the process of PoR, an exchange provides information to demonstrate its ability to cover user withdrawals with assets held in its reserves.

What is a proof-of-reserves audit

If an exchange fails this test, it’s running on fractional reserves, meaning it’s using customer funds. Established in 2018, Bitget is the world’s leading cryptocurrency exchange and web3 company. Serving over 20 million users in 100+ countries and regions, the Bitget exchange is committed to helping users trade smarter with its pioneering copy trading feature and other trading solutions.

Users are required to trust the auditor’s attestation about the assets in question. As a result, the individual users and interested 3rd parties could help verify that the company has the concerned assets in its custody. The assets in the company’s custody must also match users’ specific account balances. Modern Proof of Reserve mechanisms helps simplify the custody verification process with one click. For example, crypto exchanges such as Kraken have already introduced the facility for obtaining Proof of Reserve reports with one click.

Ultimately for users who are already familiar with public-private keys, the best way to keep your funds safe is to retain full custody of your assets. This is achievable by keeping your funds in your personal wallets instead of exchanges. As much as possible, users should utilize cold / hardware  wallets to store funds not actively in use. Changes to the individual balances are easily detected on the Merkle tree and it creates a sharp shift in the data structure. Through this, it will be impossible for institutions to tamper with users’ balances and go undetected. To verify these individual contributors, the auditor matches the digital signatures to the records on the Merkle tree and verifies that the reported balances of the individual are at least equal to that obtained from the Merkle tree.

What is a proof-of-reserves audit

You can think of it as an amount of money kept by an institution, ready for any situation where it might be needed. Liquid staking derivatives are a tokenized representation of staked native assets. They are critical for unlocking more capital efficiency and supporting the growth of the DeFi ecosystem. Chainlink PoR feeds can be used to provide increased transparency for liquid staking derivative tokens, enabling anyone to verify whether liquid staking tokens are fully backed by staked native tokens. Beyond USD-backed stablecoins—which are the most popular pegged assets within the DeFi ecosystem—Chainlink Proof of Reserve feeds can also be constructed to provide collateralization data regarding any type of pegged asset.

Meanwhile, individual users should also have the option to verify reserves cryptographically. The custodian typically provides all the required documentation and tools for independent verification. Therefore, the best reserve assets include bitcoin (BTC), ether (ETH), and stablecoins such as tether (USDT), USD coin (USDC), Binance USD (BUSD), and dai (DAI). Although the exchange may hold a portion of its reserves in other cryptocurrencies based on user deposits, a substantial part of the portfolio must include hard, highly liquid assets.

What is a proof-of-reserves audit

They publish the results, with some caveats (which will be unpacked below) to help investors understand a centralized exchange’s state of finances and whether they have enough funds to match customer deposits. A proof-of-reserves (PoR) audit of a crypto company generates a certification called an attestation. Audits may be performed on a regular schedule (such as monthly or quarterly), but some crypto companies offer a real-time proof-of-reserves balance on their website, which is updated several times a day. There are no formally accepted rules or procedures that define a Proof of Reserves audit.

  • Our reserves are verified through audits conducted biannually (twice a year) by an independent, top-25 global accounting firm.
  • Bitget inspires individuals to embrace crypto through collaborations with credible partners, including legendary Argentinian footballer Lionel Messi and official eSports events organizer PGL.
  • Implementing a proof-of-reserves program makes it easier for anyone to verify a company’s reserves.
  • These materials are for general information purposes only and are not investment advice or a recommendation or solicitation to buy, sell, or hold any digital asset or to engage in any specific trading strategy.

Blockchain oracles can also conduct decentralized proof of reserves audits for exchanges. The PoR from decentralized services such as these guarantees an institution cannot transfer more tokens than it has assets in reserve. Centralized and decentralized institutions play varying roles in the crypto ecosystem. On the other hand, with centralized exchanges, users lack total control as they keep funds with the exchange. But how can crypto users ensure that their funds have not been tampered with even when they are stored with a centralized exchange?

The role of the auditing company or firm is to find potential loopholes in the balance sheet of an exchange or to verify the accuracy of the exchange’s claims. One such auditing organization responsible for checking the financial health of a crypto exchange is Armanino LLP. To accurately audit an exchange’s proof of reserves, the Merkle tree technique is usually implemented. In the event of loss of user funds, the centralized custodian platforms could not honor withdrawal requests by users. The importance of trust is growing radically for the adoption of crypto platforms.

The Merkle root represents the sums of all users and balances, used to verify a large data set with just one piece of information. An auditor takes the summed balance in the Merkle root and compares it against the exchange’s proven holdings. For users, proof of reserves allows them to analyze which exchange would keep their funds safer. For instance, if a PoR audit showed an exchange’s reserves consist primarily of its own coin or token, a user could deem this a risk. On the other hand, if the PoRs show that the exchange’s holdings are well-diversified and over-collateralized, users can have confidence in the exchange.

Proof of Reserve or PoR is an essential concept in the world of blockchain and crypto right now. These asses could address different objectives, such as completely matching customer deposits. ” would highlight an independent audit process for verifying that the concerned party has adequate reserves for backing the balances of all its customers. In the case of crypto assets, the Proof of Reserve suggests that an auditor would check whether the on-chain assets of a company are not less than 100% of the matching customer assets during the audit. Although proof of reserves offers assurance that a crypto company has the assets in place to cover its liabilities, it is only a single snapshot in time, not a live accounting of balances over time.

A proof of reserves audit has two possible outcomes; an institution is pronounced solvent or it isn’t. The full report of audits conducted by Armanino, the third-party auditing company, can be found on the company’s and’s official websites. The assessment report was also published on GitHub and can be accessed by everyone. Chainlink Proof of Reserve utilizes the largest decentralized collection of security-reviewed and Sybil-resistant node operators in the industry to acquire and verify reserve data. Chainlink Proof of Reserve helps DeFi users get transparency into their risk exposure, increasing confidence in the backing of onchain tokens collateralized by offchain reserves. Oftentimes in these unfortunate scenarios, platforms without adequate reserves may suspend withdrawals, leaving clients unable to retrieve their assets from the platform.

What is a proof-of-reserves audit

This cryptographic approach makes it possible for individual users to verify that their account balance is included in the attestation. Proof of reserves (PoR) is a transparent auditing practice for cryptocurrency companies that provides an unbiased report of the companies’ assets in reserve. The periodic review of balances held by a financial institution or trading company has many benefits, especially for crypto users. Rather than relying on the attestations of a crypto exchange, proof of reserve auditing enables customers to verify the financial status and reports of the exchange.

Create an account today to benefit from Kraken’s industry leading security and transparency. In a world of uncertainty, PoR audits exist as one of the few processes where clients can truly know whether or not a platform is sufficiently solvent and able to process withdrawals. If you want to know more about Chainlink Proof of Reserve, visit the PoR product page. If you’re a developer and want to integrate Chainlink Proof of Reserve into your smart contract applications, check out the developer documentation or reach out to an expert.


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