Cryptocurrency exchanges Kraken and BitMEX headlined the Proof-of-Reserves (PoR) ranking, while Binance finished last due to incomplete coverage. The conclusions were reached by Nic Carter, a general partner at Castle Island Ventures.
no one asked for it, but here it is anyway: my 2022 Proof of Reserve year in review https://t.co/x6UjmHTrms
— happy nic year (@nic__carter) December 29, 2022
In ranking the platforms, the analyst considered parameters such as cryptographic proof of assets held, users’ access to information about the exchange’s obligations and the nature of disclosure, and the involvement of an external auditor.
Additional criteria included the use of PoR for other digital assets besides Bitcoin, and the regularity of the procedure.
According to Carter, Kraken provides clients with a “good level of confidence” in the absence of hidden liabilities. He also highly valued the platform’s commitment to conducting PoR on a semiannual basis.
BitMEX topped the ranking despite the absence of an auditor. The expert placed it first thanks to a highly transparent model that showed both the holdings of bitcoin and the ability to spend coins via multisignature. Liabilities and user balances were presented as a full Merkle tree.
In other words, there are no issues with omitted or negative balances. Anyone can verify the complete set of obligations in full, — wrote Carter.
A smaller score was awarded to Binance. He explained the decision by noting that the platform’s CEO Changpeng Zhao “has not yet risen to the challenge himself.”
«The first report does not provide reliable guarantees. It covers only Bitcoin, which accounts for just 16.5% of their client assets [Binance]», — explained Carter.
The specialist stressed that PoR does not disclose the full scope of obligations, which makes third-party verification difficult.
As noted, Bitstamp US CEO Bobby Zagotta admitted that the Proof-of-Reserves procedure would restore retail investors’ trust in trading platforms.
Earlier, the SEC urged investors not to trust the audits of bitcoin exchanges.
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