FTX: The Outlier Among Crypto Exchanges
Other exchanges use similar protocols to FTX, but FTX did not use them.
It is good to see that in the wake of the FTX liquidity crisis, two major crypto exchanges have announced that they will provide Proof of Reserves (PoF) within the next month. This will help to increase confidence in the crypto markets and hopefully prevent any future crises.
The OKX exchange is taking steps to improve transparency and accountability by hiring the accounting firm Armanino and publishing an auditable Merkle proof of funds. This move will help to build trust with users and reassure them that their funds are safe. OKX is also providing a detailed breakdown of its reserves, which is a good sign of its commitment to openness.
For #OKX, transparency, risk management, & consumer protection come first.
— OKX (@okx) November 9, 2022
We're hiring Armanino for auditing & will publish an auditable Merkle POF asap.
Here are 23 BTC addresses (~69K BTC) & 13 ERC20 addresses (~ $2+ BN) as a of our reserves for users to verify.
pic.twitter.com/ZwVMGS9CFq
It's great to see OKX making progress on their proof of stake implementation. They have stated that it will be completed soon, and it is encouraging to see them update their timeline to "asap." This shows that they are committed to delivering on their promise and providing a better experience for their users.
It's critical for all major crypto venues to publicly share their auditable merkle tree proof-of-reserves or POF.
— OKX (@okx) November 8, 2022
We plan to publish ours in the coming weeks (within 30 days). This is an important step to establish a baseline trust in the industry.
More to come...
As the CEO of Kucoin, Johnny Lyu is committed to providing Proof of Reserves to Kucoin users. He is working with reputable auditing institutions to ensure that the Proof of Funds is an accurate representation of the assets on hand. This commitment to transparency and accountability is what sets Kucoin apart from other cryptocurrency exchanges.
I'd like to give my sympathy for anyone who has been hurt by the current FTX situation. Hopefully, everything can be resolved quickly and the industry can get back on track.
— Johnny_KuCoin (@lyu_johnny) November 9, 2022
As crypto exchanges continue to grow in popularity, it's important for them to maintain a high level of transparency. Proof of Reserves is one way that exchanges can show that they have enough assets on hand to cover all customer withdrawals. This technique involves a third-party auditor recording all customer balances and converting them into a cryptographic Merkle Tree. This anonymizes the data to protect privacy, but it also allows users to compare the total balances held by customers with the total assets the exchange has on hand. By implementing Proof of Reserves, crypto exchanges can build trust with their customers and help ensure that the industry continues to thrive.
I believe that all exchanges should provide Proofs of Funds in order to ensure that they are not using fractional reserves. This would create a more level playing field and increase confidence in the crypto industry as a whole. I think that Binance's CZ is correct in his assessment and I hope that other exchanges will follow suit.
