Binance Proof-of-Reserve commitment gets popularity in the wake of the FTX issue

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Last Updated on November 9, 2022 by Bitfinsider

Following the liquidity issue and takeover of cryptocurrency exchange FTX, the CEO of Binance, Changpeng “CZ” Zhao, announced that his exchange will soon implement a Proof-of-Reserves audit system to verify its digital asset holdings.

In a tweet dated November 8, Zhao vowed to develop a Proof-of-Reserve mechanism at Binance in order to give “complete transparency” via the usage of Merkle Trees, a data structure used to encode blockchain data more efficiently and securely.

Typically, an independent third party conducts a Proof-of-Reserve audit to establish that the custodian’s assets are owned as declared.

The CEO’s goal to introduce Proof-of-Reserves follows Binance’s Nov. 8 agreement to acquire rival cryptocurrency exchange FTX, which has been rumoured to be on the verge of financial collapse despite CEO Sam Bankman- Fried’s denials.

Chainlink CEO Sergey Nazarov tweeted on November 8 that a cryptographic-based Proof-of-Reserves system might provide investors with a clearer picture of the solvency of a trading venue or financial institution and “is becoming the new industry standard.”

Chainlink CEO Sergey Nazarov tweeted on November 8 that a cryptographic-based Proof-of-Reserves system might provide investors with a clearer picture of the solvency of a trading venue or financial institution and “is becoming the new industry standard.”

Binance’s decision to conduct further Proof-of-Reserve audits was nearly unanimously supported by the Twitter community and crypto industry leaders.

Anthony Sassano, host of The Daily Gwei podcast, and Erik Voorhees, founder of open-source cryptocurrency exchange ShapeShift, opined that Proof-of-Reserves have already been included into decentralized finance (DeFi) and automated by smart contracts.


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