Binance’s new website outlines its proof-of-reserves approach. The company uses BTC. Binance has 101% reserves. The company has enough bitcoins to cover user balances.
This comes after FTX, another popular crypto exchange collapsed. FTX ran out of cash. Because of investor and user demand, it ceased processing withdrawals.
Since then, crypto firms and exchanges have been more honest regarding user funds. Sharing more about hot and cold wallets. Before you can trust crypto exchanges and how they manage funds, much work remains.
Binance began providing crypto wallet addresses a few weeks ago. This move indicated that the corporation has many assets and can process many withdrawals. The company didn’t specify whether those are user assets or Binance’s own financial sheet.
Binance’s new proof-of-reserves site clarifies that BTC wallets don’t include Binance’s own cash.
Binance’s business holdings are held on a separate ledger. You can’t verify Binance’s claim with a blockchain explorer.
Binance has BTC. Totaling Binance’s wallets is simple. The startup uses a Merkle tree to establish a cryptographic seal for user assets.
Binance users possessed 575742.4228 BTC on November 22 at 23:59 UTC, or $9.5 billion at the time. Binance’s own bitcoins covered 101% of these funds. Binance has enough BTC to handle all withdrawals if everyone withdraws at once.
Individual users can check if their accounts are included in the snapshot of user balances using the Merkle tree’s root hash. Binance’s user balances span Spot, Funding, Margin, Futures, Earn, and Options Wallet. The company offers a Python script for self-checking.
“Given recent occurrences, the community will demand more from crypto exchanges than from traditional financial institutions. Binance founder and CEO Changpeng Zhao ‘CZ’ stated the new functionality will let users verify their funds. “Because Binance’s user base is considerably greater than the next largest exchange, this is a massive undertaking that will take a few weeks. We’re striving to release the next update fast to satisfy community expectations.”
The company wants to share proof-of-reserves data for ETH, USDT, USDC, BUSD, and BNB. Binance sells hundreds of crypto assets, so let’s hope they can support lesser-known withdrawals.
The company should also use independent financial and security auditing organizations so you can trust it. Today’s new proof-of-reserves mechanism is a step forward.