According to a statement on March 7, Binance, a cryptocurrency exchange, has added 11 more tokens to its proof-of-reserves (PoR). They include Enjin Coin ENJ and Mask Network (MASK). WazirX (WRX), The Graph (GRT), Chromia (CHR), Curve DAO Token (CRV), 1inch Network (1INCH), PowerPool (CVP), Hashflow (HFT), SSV.network (SSV), and Dogecoin DOGE are some of the cryptocurrency projects mentioned above.
In the most recent update, Binance said that its proof-of-reserves (PoR) system now has over $63 billion spread over 24 assets. Bitcoin BTC is one of the biggest assets on the exchange.
In order to ensure that consumers can rest comfortably knowing their assets are held for them 1:1 in the exchange custody, Binance’s PoR “uses Merkle trees to add up on-chain data.” ZK-SNARKs were implemented by the exchange in February 2023 as part of a significant update to its PoR system, which Binance claimed will “improve the privacy and security of user data during the verification process.”
Binance joins other exchanges in implementing PoR
In the wake of FTX’s collapse, exchanges have started implementing the PoR method for increased transparency, but experts have consistently warned customers of the limitations of such methodology. They cannot be disclosed unless accompanying financial statements support the PoR and address issues with the use of leverage, collateralization, and associated proof of liabilities.
Binance’s PoR audit was taken down from Mazars’ website, and the South African auditor stopped offering such services to cryptocurrency exchanges altogether. Binance’s Bitcoin and cross-chain Bitcoin assets were “completely collateralized” at the time, the company had previously stated on December 7. Yet Mazars added that its techniques were based on “agreed-upon procedures” (AUP) and weren’t an audit of the company’s finances. The AUP’s scope was also constrained because it did not look at additional tokens.
Furthermore, the exchange is unable to secure the cooperation of the Big Four accounting firms, Deloitte, Ernst & Young, KPMG, and PwC. In contrast, Deloitte continues to review Coinbase’s financial statements. Based on “agreed-upon procedures” (AUP), it did not constitute a financial audit. The AUP was also limited in scope, as it did not investigate other tokens.
