Kraken, one of the biggest and oldest crypto exchange has launched a method to prove that it holds 100% of the crypto assets deposited.
“A Proof of Reserves (PoR) is an independent audit conducted by a third party which seeks to ensure that a custodian holds the assets it claims to on behalf of its clients.
This auditor takes an anonymized snapshot of all balances held and aggregates them into a Merkle tree — a privacy-friendly data structure that encapsulates all client balances…
Any client can independently verify that their balance was included in the Proof of Reserves audit by comparing select pieces of data with the Merkle root.
Any changes made to the rest of the data, however small, will affect the root – making tampering obvious,” the exchange said.
Kraken proves ownership of addresses by signing with a private key, anyone can then check they hold their deposit by just following simple instructions.
Most crypto exchanges used to provide a similar facility back in 2014 following the bankruptcy of MT Gox, but few now do with Kraken so reviving this old method of proving they hold all deposits, thus assuring customers their withdrawal would be processed even in the event of a bank run.
Due to crypto, they can prove total holdings as well as individual holdings, so making an audit effectively open source.
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