Proof of Binance reserves is 'useless without liabilities': Kraken CEO

According to Powell, a full proof of reserve audit should include the sum of the customer's liabilities, user-verifiable cryptographic evidence that each account has been included in the sum and signatures proving the depositary's control over the portfolios.

New

Disclaimer: Article has been updated to reflect Binance CEO CZ's response to concerns raised by Kraken CEO Jesse Powell.< /em>

The collapse of crypto exchange FTX has revealed the importance of proof of reserves to avoid situations involving misappropriation of user funds. As exchanges began to proactively share wallet addresses to prove the existence of user funds, several entrepreneurs, including Kraken CEO and co-founder Jesse Powell, called the practice "unnecessary" because trades do not include liabilities.

According to Powell, a full proof of reserve audit should include the sum of the client's liabilities, user-verifiable cryptographic evidence that each account was included in the sum, and signatures proving the custodian's control over the wallets . Although Kraken's proof of reserve helps verify the company's assets against liabilities, Powell continues to call out other players who failed to include accounts with negative balances.

I'm sorry but no. It's not PoR. This is either ignorance or intentional misrepresentation.

The Merkle tree is just bullshit with no auditor to make sure you don't include accounts with negative balances. The state of the asset is useless without a liability. https://t.co/b5KSr2XKLB

— Jesse Powell (@jespow) November 25, 2022

Powell has called out CoinMarketCap in the past for sharing incomplete proof of reserves because it lacked “cryptographic proof of client balances and wallet control.” He repeated that...