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CEO and co-founderKraken exchange Jesse Powell called the current practice of exchanges confirming their reserves as meaningless, since they do not inform users of their obligations.
Jesse Powell rebukedmarket partners is that when confirming reserves, cryptocurrency exchanges provide users with incomplete data that may distort the real picture. Powell believes that exchange reserves are not just a list of the balances of all wallets, but assets minus liabilities.
</p>I'm sorry but no. This is not PoR. This is either ignorance or intentional misrepresentation.
The merkle tree is just hand wavey bullshitwithout an auditor to make sure you didn't include accounts with negative balances. The statement of assets is pointless without liabilities. https://t.co/b5KSr2XKLB
— Jesse Powell (@jespow) November 25, 2022
According to him, a full audit of Proof-of-Reservemust include the amount of the exchange's liabilities, user verifiable cryptographic proof that each account was included in the amount, and signatures confirming the custodian's control of the wallets.
“The whole point is to understand whether the exchange has more cryptocurrency than it owes to clients. Adding a hash to a row identifier is useless without everything else,” Powell said.
Earlier, the Binance exchange announced the launch of the systemconfirmation of Proof-of-Reserve, which should be the next step towards greater transparency and strengthening trust in the trading platform ecosystem.
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