CEO and co-founder of Kraken exchange Jesse Powell called the current practice of exchanges confirming their reserves is meaningless, as they do not inform users about their obligations.
Jesse Powell reproached market partners for the fact that when confirming reserves, cryptocurrency exchanges provide users with incomplete data that can distort the real picture. Powell believes that the reserves of the exchange are not just a list of the balances of all wallets, but assets minus liabilities.
I’m sorry but no. This is not PoR. This is either ignorance or intentional misrepresentation.
The merkle tree is just hand wavey bullshit without an auditor to make sure you didn’t include accounts with negative balances. The statement of assets is pointless without liabilities. https://t.co/b5KSr2XKLB
— Jesse Powell (@jespow) November 25, 2022
A full Proof-of-Reserve audit should include the exchange’s liability amount, user-verifiable cryptographic proof that each account was included in the amount, and signatures confirming the custodian’s control of the wallets, he said.
“The whole point is to see if an exchange has more cryptocurrencies than it owes to customers. Adding a hash to a row ID is useless without everything else,” Powell said.
Binance exchange previously announced the launch of the Proof-of-Reserve system, which should be the next step towards greater transparency and building trust in the trading platform ecosystem.
Source: Bits
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