Seychelles-based crypto exchange OKX published its second proof of reserves (PoR) on Thursday, showing that user assets for the top 3 cryptocurrencies are fully backed. 

The exchange promised to publish subsequent PoR reports on roughly the 22nd day of each month from today onwards. 

Committing to PoR

In a press release from OKX, the company provided a new tool allowing users to self-verify its reserves using open-source tools. 

The tool lets anyone examine the results of OKX’s proof of reserves audits at different points in time. As of its first audit on November 22nd, the exchange’s Bitcoin and Ethereum (ETH) reserves reportedly provided 102% backing on user assets, while Tether (USDT) deposits were 101% backed.

The firm’s most recent audit on December 20th shows that users’ BTC, ETH, and USDT were backed 101%, 103%, and 101% respectively. In absolute terms, that’s 108,434 BTC, 1,051,028 ETH, and 3,061,068,937 USDT in the exchange’s wallets. 

While its Merkle Tree PoR system only applies to these three assets, they cumulatively compromise over 90% of OKX’s portfolio. 

“To ensure the transparency of its PoR program, OKX published more than 23,000 addresses and will continue to use these addresses to allow the public to audit asset flows,” stated the company. “The OKX PoR protocol is open source and available to the public on Github.”

“OKX has always maintained 1:1 reserves,” the exchange added. Former FTX boss Sam Bankman-Fried claimed much the same before his exchange ultimately went bankrupt last month. This has inspired other exchanges to step up their game in terms of proving the safety of user funds, through procedures like proof of reserves. 

Is PoR the Real Deal?

Mazars, an independent auditing firm, helped Binance provide Merkle-tree proof of reserves on its Bitcoin holdings earlier this month. However, the firm paused new auditing services for crypto clients earlier this month due to public misunderstandings about how its audits worked. It has also removed its page related to Binance’s audit. 

PoR is an auditing method that uses on-chain data to verify that an exchange isn’t tampering with user assets. In the case of Binance and OKX, users can verify their own individual balances by locating them in the Merkle tree in which they’re recorded. 

Still, certain critics aren’t buying the legitimacy of such reports. Kraken CEO Jesse Powell – whose exchange uses a PoR system – has criticized Binance’s system for multiple flaws. These include its use of “collateral” value when assessing Binance’s reserves and its inclusion of negative balances when assessing depositors’ assets. 

The Securities and Exchange Commission (SEC) recently criticized PoR as an auditing method as well. 

“Investors should not place too much confidence in the mere fact a company says it’s got a proof of reserves from an audit firm,” the SEC chief accountant Paul Munter to the Wall Street Journal on Thursday. 

Such a report, he said, “is not enough information for an investor to assess whether the company has sufficient assets to cover its liabilities.”

The post OKX Releases Second Proof of Reserves Report While Promising Monthly Updates appeared first on Crypto Adventure.

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Filed under: Bitcoin - @ December 23, 2022 6:24 pm