Nic Carter dives into proof-of-reserves, ranks exchange attestations


He ranked the attestations provided by some of the most prominent crypto trading platforms and conducted an in-depth analysis of centralized exchange proof-of-reserves.

A detailed examination of several exchanges’ proof-of-reserves (PoR) was published by Carter. Assuring credibility by taking a POR for all assets and committed to an ongoing procedure to determine which PORs are of the highest quality, the crypto executive used parameters such as attestation to assets held and disclosure of liabilities, involving a third-party auditor.

Scores of crypto exchanges based on PoR. Source: Medium

In addition to Kraken and BitMEX, the trading platforms employed Armanino for their proof-of-reserves. According to Carter, Kraken gives clients a good sense of confidence that there are no hidden liabilities. In addition, Carter praised the trading platform’s commitment to performing PoRs every six months.

A very transparent model was chosen by BitMEX, which also received praise, since it did not rely on an auditor. As for the exchange’s assets, all BTC balances were listed and proof that BitMEX multisig could spend them. A full Merkle tree of user balances was published for its liabilities, Carter wrote. “This means there are no issues with excluded or negative balances since anyone can vet the liability set in its entirety.”

CryptoQuant verifies Binance’s reserves, finds no FTX-like behavior

While some received high marks in terms of PoR score, Binance’s PoR did not do well on the rankings. According to Carter, the exchange’s low PoR score is due to an incomplete PoR. Though Binance CEO Changpeng Zhao (CZ) highlighted the importance of PoRs after the FTX collapse, he still hasn’t taken the challenge.

In its first Proof of Risk, Binance does not provide strong assurances. It only covers Bitcoin, which accounts for 16.5% of their client assets.”

A third party cannot verify the procedure, Carter said, because the PoR does not show the whole liability list. This makes it challenging for a third party to verify the procedure.

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