Nine Leading Crypto Exchanges Commit to Proof of Reserve Amidst FTX’s Liquidity Crunch

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Following the liquidity crunch of Sam Bankman-Fried’s FTX exchange that ignited a market collapse, other prominent exchanges are turning to a new proof of reserve system to prevent future reoccurrence.

Nine Exchanges Back Proof of Reserve

The FTX liquidity crunch, which ignited the fifth worst crypto crash, has sparked increased demand for transparency among top exchanges. Exchanges are now turning to proof of funds to regain users’ trust.

In the last 24 hours, nine leading crypto exchanges have announced that they will publish proof-of-their-reserve holdings within the next month. They include Binance, Gate.io, KuCoin, Poloniex, Bitget, Huobi, OKX, Deribit, and Bybit

Proof of reserve audits is usually conducted by an independent third party to ensure the custodian’s assets are intact and stored as claimed. Binance has introduced Merkle trees to ensure data is processed more efficiently and securely.

The Merkle Tree Proof of Reserve

In crypto, Merkle Tree, or “binary hash tree”, is a system of encoding blockchain data more efficiently and securely. It allows exchanges to store the users’ hash value of assets for each user in “leaf nodes.”

A third party then audits the leaf nodes in the Merkle Tree. Binance has announced its own Merkle tree, while Gate.io has announced that it will make its Merkle Tree Proof of Reserves solution open source.

On the Flipside

  • FTX, which had no proof of fund before its liquidity crisis, is looking at a potential partnership with Justin Sun to revive the crypto exchange.

Why You Should Care

The Merkle Tree certificate to be published will ensure exchanges are transparent, an important step in establishing trust in the crypto industry.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed to be financial legal or tax advice. Trading Forex, cryptocurrencies, and CFDs poses a considerable risk of loss

Author

Milko is a DailyCoin reporter, mainly focused on Ethereum (ETH), Cardano (ADA), and their founders (Vitalik Buterin and Charles Hoskinson). Milko is an avid follower of crypto and blockchain technology and has written thousands of articles on the subjects. He finds joy in transforming complex issues into written content that anyone can understand. Milko has used and analyzed numerous exchanges, such as Coinbase, FTX, and Binance. He also closely follows all of the latest news around the largest decentralized exchanges (DEXs).