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The proof of reserves can be done in such a way that each user can verify that their balance is backed: https://www.kraken.com/proof-of-reserves https://www.kra
by xlbuttplug 4y ago
The proof of reserves can be done in such a way that each user can verify that their balance is backed: https://www.kraken.com/proof-of-reserves https://www.kraken.com/proof-of-reserves
> Proof of reserves today != proof of reserves tomorrow.
You should be able to detect large outflows/inflows from/to their wallets and demand an explanation.
- danuker 4y agoCoffeezilla demanded explanations from Tether. None were offerred. https://www.youtube.com/watch?v=-whuXHSL1Pg https://www.youtube.com/watch?v=-whuXHSL1Pg
- xlbuttplug 4y agoProviding a proof of reserves is about putting user/investor minds at ease. If you're not willing to go all the way, why bother doing it at all? Though I guess post FTX, all exchanges are scrambling to avoid losing a large chunk of their userbase. Claiming to have a proof of reserves, even if it was done in a half-assed and non transparent way, is probably good enough for the non-scrutinous user.
- beefield 4y agoHow does Kraken/proof of reserves ensure that in case of bankruptcy there are no creditors with higher privileges?
- xlbuttplug 4y agoThat's a good point. The exchange's remaining liabilities outside user deposits are still an unknown. (Or at least can't be verified in a trustless manner.)
- skinnymuch 4y agoDoesn’t that make it borderline worthless?
- vkou 4y agoCorrect. There is no on-chain way to prove that my exchange doesn't actually owe some third party a trillion dollars.
- xlbuttplug 4y agoIt does prove that the exchange is in possession of "liquid" assets matching user deposits, which I don't think is worthless, especially if the userbase is large. I agree that it's far from a comprehensive proof though. Perhaps exchanges need to stick to the bigger auditors for now.
- lottin 4y agoYes, but it's probably good enough to fool the average crypto investor.