Binance Ensures Asset Backing with Proof-of-Reserves Report
Binance, the leading cryptocurrency exchange, has recently released its proof-of-reserves report, providing assurance that it backs all customer assets on a 1:1 basis. In this report, Binance utilizes zero-knowledge methods to verify the existence of a user’s balance in its customer wallets.
To consolidate customer balance data, Binance summarizes all user balances in a Merkle Root hash. This hash acts as a seal that auditors can examine to confirm the accuracy of the data from the Merkle Tree.
While Binance touts its use of zero-knowledge proofs, some skeptics argue that the reserves report appears incomplete. However, a special type of zero-knowledge proof called zk-SNARK is employed to verify the inclusion of a user’s balance in the Merkle Root calculation.
Binance’s proof-of-reserves report is a crucial step in ensuring that it holds sufficient crypto assets to meet customer withdrawals. By segregating assets into different wallets, customers are further protected from insolvency claims.
It is worth noting that Binance only discloses the reserves for 31 out of the 350 tokens listed on its platform. However, this report showcases overcollateralization of key assets such as BNB, USDT, and BUSD stablecoin.
Closing Hot Take: Binance’s proof-of-reserves report demonstrates its commitment to transparency and safeguarding customer assets. The use of zero-knowledge methods and asset segregation provides an added layer of security for crypto investors.