By Darren Parkin
Binance has taken the next step in its effort to provide transparency of user funds, following the recent disclosure of its hot and cold wallet addresses.
The update shows the proof-of-reserves for BTC and an update using the Merkle Tree data structure for users to verify BTC holdings. It’s the first iteration of the feature, with verification for ETH, USDT, USDC, BUSD and BNB in the pipeline.
The exchange is also working to onboard an independent third-party auditor to validate the Merkle Tree data.
“Given recent events, it is understandable that the community will demand more from crypto exchanges, far more than what is currently required of traditional financial institutions,” explained Changpeng ‘CZ’ Zhao , CEO and founder of Binance.
“That’s why we’re pleased to provide this latest feature for our users to verify their funds.
“As Binance’s user community is exponentially larger than the next largest exchange, this is a massive undertaking and will take a few weeks to develop the data for the majority of our assets in custody. We are working to get the next update out as quickly as possible to meet the community’s expectations.”
The new proof of reserves site has been designed to show that Binance, as a custodian, is holding client funds in full, with reserves. In simple terms, when a user deposits one Bitcoin, Binance’s reserves increase by at least one Bitcoin to ensure client funds are fully backed.
People will be able to check the site and see Binance’s proof of reserves, showing the platform’s reserve ratio alongside customer liabilities.
Binance also says it is looking at introducing ZK-SNARKs in the coming weeks. ZK-SNARKs are a powerful toolkit that bring additional privacy and simplicity benefits to proof-of-reserves and liabilities.
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