Binance to start proof-of-reserves; CZ proposes all crypto exchanges follow suit
Binance CEO Changpeng Zhao (CZ) recently announced that Binance will launch a proof of reserve to support “full transparency”.
CZ also proposed that all cryptocurrency exchanges do proof of reserves for Merkle trees. According to the CEO, fractional reserves are good for traditional banks and not for crypto companies.
All crypto exchanges must be Merkle Tree Proof of Reserve.
Banks operate on partial reserves.
Crypto exchanges should not.@Binance Proof of reservation will start immediately. Full transparency.— CZ🔶 Binance (@cz_binance) November 8, 2022
Please note that a partial reserve is only a portion of a bank’s demand deposit that is held as a reserve and can be withdrawn immediately. Some crypto influencers believe that centralized exchanges still allow for partial reserves, which makes crypto “worse.”
One of the reasons cryptocurrencies exist is to eliminate fractional reserves. Now CEX is making things worse by rebuilding partial reserves without the Fed’s backstop. Very bullish on DeFi. Regulations should also require CEX to implement proof of reserves. There is also the possibility of using ZK proofs.
— Dominator008💎🟢🔶🦙⚛️🎇 (@Dominator0081) November 7, 2022
The Recent Revelation To Launch Proof Of Reserve Came After CZ announced Binance to acquire FTX. Previously, the exchange headed by Sam Bankman-Fried large amount of withdrawals of assets, rapidly depleting its treasury.
Also native token over 70 As a result, in just a few days. As a result, there was concern about the bankruptcy of the exchange.
Once the acquisition is complete, Binance will oversee the bulk of the cryptocurrency market.
How can Proof of Reserve increase crypto transparency?
Cryptocurrency users can use Proof of Reserves (PoR) to ensure that the balances they hold on exchanges are backed by real assets. This process uses sophisticated cryptographic accounting procedures based on Merkle trees, a data structure explicitly designed to preserve privacy.
Point-in-time authentication is easier to work with, and simple cash flow analysis doesn’t take into account everything (such as unaccounted liabilities), which makes PoR more necessary. By providing an accurate picture of holding balances, cryptocurrency exchanges help earn the trust of their users.
Previously, talk FTX operates a fractional reserve bank, but users may enjoy full transparency after the recent acquisition.As influencer Dan Ashmore believes in FTX could have avoided all discussion of that bankruptcy If you have some kind of on-chain proof reserve.
If FTX has some kind of on-chain margin, won’t all bankruptcy chats be resolved?
It’s ironic that the crypto industry is debating whether FTX is a good fit for it. Isn’t it meant to be cryptographically transparent?
— Dan Ashmore (@DanniiAshmore) November 7, 2022
