Binance, the world’s largest crypto exchange, says it holds client funds in full, releasing a ‘proof of reserves’ indicating a 1:1 ratio between user balances on the exchange and the amount of Bitcoin held by the exchange.
‘582,485.9302 BTC are held by the exchange against a customer net balance of 575,742.4228 BTC, which comes to a 101% reserve ratio,’ Binance said.
The proof of reserves will:
- Start initially with $BTC
- Other tokens ($ETH, $USDT, $USDC, $BUSD, and $BNB) will follow, and
- Networks being added in the next couple of weeks
All crypto exchanges should do merkle-tree proof-of-reserves.
Banks run on fractional reserves.
Crypto exchanges should not.@Binance will start to do proof-of-reserves soon. Full transparency.— CZ 🔶 Binance (@cz_binance) November 8, 2022
Binance has also said it is working with third-party auditors to audit the results of the Proof of Reserves.
According to the exchange, when a user deposits one Bitcoin, Binance’s reserves increase by at least one Bitcoin to ensure client funds are fully backed:
“What this means in actual terms is that Binance holds all user assets 1:1 (as well as some reserves), we have zero debt in our capital structure and we have made sure that we have an emergency fund (SAFU fund) for extreme cases.”
Binance also announced a way for users to verify that their assets are held on the exchange via the website, letting them verify their assets against Binance’s Merkle tree.
Binance, which published a list of its crypto addresses earlier in November 2022, had said that it was working on a Merkle tree, a crypto technology that can be used to verify that individual user accounts are included in the total amount of client funds it has declared.
How to Verify Your Assets on the Binance Website
To verify your assets:
- Log in to the Binance Website, click on ‘Wallet,’ then click on ‘Audit’
- You will be able to find your Merkle Leaf and Record ID on the page
- Select the audit date you want to verify
You will then find confirmation of the audit type, your Record ID (specific to your account and this particular audit), the assets that were covered, and your asset balances at the time of the audit.
The Record ID enables you to independently verify that your account balance was included by the third-party auditor and would be available shortly.
These steps come a few weeks since Binance CEO, Changpeng Zhao, announced the exchange will be doing a Proof-of-Reserves.’ This came in the wake of FTX suspending customer withdrawals on its way to bankruptcy.
“Given recent events, it is understandable that the community will demand more from crypto exchanges, far more than what is currently required of traditional financial institutions. That’s why we’re pleased to provide this latest feature for our users to verify their funds,” said Changpeng Zhao.
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