In a bid to retain users trust in it’s services, Binance has released its proof-of-reserve system. The development emanated two weeks after the World largest cryptocurrency exchange by trading volume pledged to publish its PoR.
Currently, in the cryptocurrency sphere, centralized exchanges are releasing their PoR due to the crisis of FTX. For centralized exchanges, it’s now imperative for them to release their PoR to regain users’ trust. The crisis that led to the collapse of FTX fueled speculations that CEX are unreliable. Now, like many other cryptocurrency exchanges, Binance has released its PoR system.
As revealed in an announcement on its website, Binance outlined how users can use the system to verify its reserves. At the moment, users can only verify their Bitcoin holding on Binance via the Merkle Tree-based system. However, the prominent cryptocurrency exchange vowed to add more coins soon.
Furthermore, Binance pledged to remain transparent with the details of its reserves. The cryptocurrency exchange through the announcement said more updates to emphasize its transparent dealings will come up in subsequent weeks. More so, some of these updates include the employment of third-party auditing firms to audit its PoR results.
Likewise, Binance will implement the Zero-knowledge Succinct Non-interactive Argument of Knowledge (ZK-SNARKs). It’s imperative to note that the Co-Founder of Ethereum Vitalik Buterin proposed the adoption of ZK-SNARKs. The initiative received backing from Binance’s CEO, Changpeng Zhao and other notable stakeholders in the industry. Notably, ZK-SNARKs is a mechanism that will deny centralized exchanges the power to withdraw users’ funds without their approval.
Binance call for transparency
Since the collapse of FTX, Binance through its CEO has called for transparency from centralized exchanges. The CEO, Changpeng Zhao urged cryptocurrency exchanges not to use users’ funds for illicit businesses. The call for transparency by Binance has spurred cryptocurrency exchanges to engage in the trend of releasing their PoR. Firms like Bitfinex, CoinDCX, OKX, KuCoin and Crypto.com have released their PoR. While Exchanges like Huobi and Gate.io were criticized after their PoR indicates some loan deficits.
Additionally, aside from cryptocurrency exchanges firms in the industry like Coinmarketcap and Chainlink Labs have provided PoR support. Recently, Coinmarketcap released a feature that will help investors to track their assets on crypto exchanges that have published their PoR. Also, Chainlink proposed to provide PoR auditing services for cryptocurrency exchanges. However, the recent release by Binance will strengthen its relationship with its users.