Bitcoin advocate Nic Carter has released an in-depth analysis of centralized exchange reserve proofs and proof ratings provided by some of the most prominent crypto trading platforms in the space.
Carter published a detailed examination of the quality of proof-of-reserve (PoR) of several exchanges. Crypto executives use parameters such as attestation for the assets they hold and disclosure of responsibilities, integrating third-party auditors, demonstrating credibility by obtaining PoRs for all assets and conducting continuous procedures to determine the best PoRs.
Crypto trading platforms Kraken and BitMEX top the list. According to Carter, Kraken, which employs Armanino for proof-of-reserve, gives the client “a good level of confidence” that there is no obligation to hide. Carter also praised the trading platform’s commitment to conduct a PoR every six months.
On the other hand, BitMEX, which also received praise, does not rely on auditors but chooses a very transparent model. On the asset front, the exchange lists all BTC balances held by the exchange and proof that it can be used by the BitMEX multisig. Under his responsibility, the company published a complete Merkle tree of user balances. “This means that there is no problem with excluded or negative balances because someone can check the liability in full,” Carter wrote.
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While some received high marks in terms of PoR scores, crypto exchange Binance’s PoR did not fare well in the rankings. According to Carter, the low PoR score is because the PoR is incomplete. Crypto analysts believe that although Binance CEO Changpeng Zhao (CZ) highlighted the importance of PoRs after the FTX collapse, executives “have not yet risen to the challenge themselves.” He wrote:
“Binance’s first PoR did not provide a strong guarantee. It only covered Bitcoin, which represented only 16.5% of the client’s assets.
While PoR allows individual users to verify that they are included in a set of responsibilities, Carter said PoR does not show the entire list of responsibilities. This makes it difficult for third parties to verify procedures according to analysts.