The most recent exchange to provide evidence of reserves was Crypto.com, which did so after an audit by the independent consulting firm Mazars Group, which specializes in cryptocurrency.
Crypto.com gets audited by Mazar
On December 9th, a statement issued on Crypto.com’s website revealed the company’s intention to join Binance in supplying proof of reserves. According to the proof of reserves, the exchange has more than enough crypto assets to settle all client obligations. Top cryptocurrencies such as Bitcoin and Ethereum have above-average support on the exchange’s client balances.
According to the evidence of reserves, they holds all three currencies required to conduct withdrawals on the platform: 102% of Bitcoin, 101% of Ether, and 102% of USD Coin. The report also cites USDT, XRP, Dogecoin, Shiba Inu, Chainlink (LINK), and Mana, proving that they have reserves for each of these cryptocurrencies over 100%. The conversation was tweeted and pinned to its Twitter feed, along with an update that stated,
“Crypto.com releases Proof of Reserves audited results. Mazars Group compared the assets held in on-chain addresses proven to be controlled by Crypto.com with customer balances through an auditor-overseen live query of a production database as of Dec. 7.”
Mazars Group, an international audit, tax, and accounting company that had recently examined Binance’s proof of reserves one month previous, performed the audit, according to the release. Mazar claims that the open-source Silver Sixpence Merkle Tree Generator tool is utilized on their audit website. By running the application in their development environment, programmers may detect fake results if the audit page had been modified to create them.
Crypto.com is working hard to establish trust
Since the stunning collapse of FTX, created by Sam Bankman-Fried, centralized exchanges have been under heavy criticism from the cryptocurrency community. Because of the subsequent spread, they were forced to cease Solana withdrawals.
According to their CEO, publishing their proof of reserves, will help demonstrate to customers that it is truly a competent custodian of user assets and has the required resources to satisfy all withdrawal requests if the need arises. CEO Kris Marszalek, explained:
“Providing audited proof of reserves is an important step for the entire industry to increase transparency and begin the process of restoring trust. Crypto.com is fully committed to providing customers around the world a safe, secure, and compliant means of engaging with digital currencies.”
Crypto.com is one of numerous exchanges that has presented proof of reserves. Despite the fact that its liabilities have not yet been evaluated, the cryptocurrency exchange OKX produced evidence of reserves on November 23. Binance’s proof of reserves for bitcoin has also been submitted.
Clients may verify crypto.com’s reserves
Crypto.com also allows customers to independently audit the exchange’s reserves if they are unsure about the exchange’s asset and liability statement. Users may log in, examine the assets they had on hand at the moment the audit was performed, and copy the Merkle hash generated from the balances. After receiving the Merkle hash, clients may go to a separate audit page to determine whether their liabilities are included in a larger Merkle tree of the exchange’s audited liabilities.
Arguments against proof of reserves
Because the proper implementation of proof of reserves demands an external auditor’s examination of the company’s obligations to ensure its solvency, the practice has received some criticism. Jesse Powell, CEO of Kraken, who recently challenged Binance’s proof of reserves, said,
“Ok, I’ll give you a hint.” This is just the easy stuff that says that this obviously is not a traditional proof of reserves and should immediately have had actual journalists digging. Why use collateral value? Why are negative balances included? No wallet signing? “Who issues BTCB and BBTC?”