Following the failure of FTX, the top cryptocurrency exchange Binance has introduced a new proof-of-reserves method that is intended to restore confidence and transparency to the industry.
In order to guarantee that all clients' funds are returned in full in the case that everybody chooses to withdraw all of their holdings at once, proof of reserve entails assets maintained by an exchange or custodian.
“When a user deposits one bitcoin, Binances reserves increase by at least one bitcoin to ensure client funds are fully backed,” the discussion described in a blog post.
“[The] Proof of Reserves (PoR) System... is the next step in our effort to provide transparency on user funds. The launch of this feature will start initially with BTC, with other tokens and networks being added in the next couple of weeks.”
With a reserve ratio of 100%, Binance indicated that there are presently more bitcoin reserves than customer funds.
The measure is in line with the vow issued by Binance CEO Changpeng Zhao (CZ) to guarantee that individual cryptocurrency investors do not give up hope in the market after the liquidity issue at FTX disclosed serious flaws in one of the most renowned firms in the sector.
The most recent investigation revealed that users of Binance hold more than 500,000 bitcoins on the exchange, which are currently worth more than $8 billion.
“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. That‘s why we’re pleased to provide this latest feature for our users to verify their funds,” The CEO said in a statement.
“As Binance‘s user community is exponentially larger than the next largest exchange, this is a massive under-taking 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.” he added.
The CEO of competing bitcoin exchange Kraken blasted the effort, calling it “pointless” without customer responsibilities.
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