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Written by Ayanika Das
Ayanika is an experienced content writer with a background in Hotel Management and a master's in hospitality administration from IHM Calcutta. With her expertise in content creation and copywriting, Ayanika has collaborated with numerous companies across various sectors. She's currently focusing on the crypto and investment sectors and crafting in-depth pieces about different aspects of the crypto space.
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Last Updated on February 2, 2025
What is Proof Of Reserves On Crypto Exchanges?
Proof of Reserves (PoR) on crypto exchanges is a transparency mechanism that allows users to verify that an exchange holds enough assets to cover all customer deposits.
It serves as cryptographic proof, typically conducted through an independent audit, to confirm that the exchange has custody of the assets it claims to have.
This system ensures that the exchange is not operating with a fractional reserve when only a portion of deposits is backed by actual assets.
Binance, the largest crypto exchange in the world as of 2025, launched its Proof of Reserves (PoR) initiative in 2022. PoR refers to the assets Binance holds in custody for its users.
This initiative aims to provide transparency by showing that Binance holds enough funds to cover all user assets 1:1, with additional reserves as a safety measure.
To ensure transparency, Binance leverages Merkle trees to aggregate on-chain data. This allows users to verify that their assets are securely and fully backed.
In 2023, Binance further enhanced its PoR program by incorporating zk-SNARKs (zero-knowledge protocols), improving user data privacy and security during verification.
With zk-SNARKs, Binance can prove that the total user asset balance in the Merkle tree accurately represents all user accounts without revealing sensitive information.
Users can easily check that their account balance is included in the proof.
Also, by the end of 2023, Binance’s PoR system had verified over $63 billion in user assets and allowed users to verify their assets for 24 tokens.
From all these, it’s obvious that Binance offers one of the industry’s strongest Proof of Reserves (PoR) systems.
Kraken was one of the first cryptocurrency exchanges to adopt a proof-of-reserves system. The exchange even successfully passed a cryptographically verifiable proof-of-reserves audit.
Stefan Thomas, a respected figure in the cryptocurrency community, conducted this audit.
Kraken has been issuing proof-of-reserves reports long before it became a common practice in the industry, setting a standard for transparency.
Unlike many exchanges, Kraken ensures its audits are correctly done, involving a third-party review by Armanino.
These audits are conducted bi-annually at unscheduled times and account for both assets and liabilities, providing a complete picture of the exchange’s financial health.
In addition to Bitcoin and Ethereum, Kraken expanded its proof-of-reserves coverage to include five more leading cryptocurrencies.
As of February, these currencies cover 63% of the total assets held on the platform, further strengthening Kraken’s commitment to transparency and user trust reports.
In 2022, Bitget launched its Proof of Reserve (PoR) initiative, similar to Binance, using a Merkle tree structure to enhance transparency.
One of the standout features of Bitget’s PoR is that the reserve data is updated monthly, ensuring that the platform maintains a reserve ratio of at least 1:1 for user assets.
Bitget prides itself on offering a 100% reserve ratio.
This means that even if all users withdrew their assets simultaneously, the platform could cover every withdrawal. Users can independently verify their assets using the open-source verification tool, MerkleValidator, available on GitHub.
Like Kraken, Bitget works with third-party auditors to verify the accuracy of its reserves. These auditors perform regular checks to ensure that Bitget holds enough assets to cover all user deposits.
In the most recent update for April 2024, Bitget reported a total reserve ratio of 176%, demonstrating that the platform holds significantly more assets than required to cover user deposits.
In 2022, Crypto.com launched its Proof of Reserves (PoR) system to enhance transparency. Like other exchanges, it uses a Merkle tree structure to allow users to verify the platform’s reserve holdings independently.
Crypto.com partnered with the independent auditing firm Mazars Grou to ensure accuracy and verify that the exchange holds sufficient assets to cover all user liabilities.
Mazars has also worked with other exchanges like Binance for similar PoR audits.
Crypto.com regularly publishes detailed reports of its reserve holdings, disclosing the types of assets it holds, such as Bitcoin (BTC), Ethereum (ETH), stablecoins like USDC and USDT, and other cryptocurrencies.
This transparency gives users a clear view of the platform’s solvency and risk exposure.
Currently, the platform provides verified reserves for assets, including BTC, ETH, USDC, USDT, XRP, DOGE, SHIB, LINK, and MANA.
The reserve ratios for these assets are regularly updated and shared with users, ensuring trust and accountability.
MEXC, a global cryptocurrency exchange founded in 2018, introduced the Proof-of-Reserves (PoR) system in 2023 to enhance transparency.
This system allows users to check and compare the assets held in MEXC’s on-chain wallets with the total assets of its users. If MEXC’s on-chain assets are equal to or greater than user assets, it confirms that the exchange holds enough reserves.
Like other exchanges, MEXC uses a Merkle tree-based method, which lets users verify their assets on the platform without compromising privacy.
The PoR system covers various accounts, including spot, fiat, and futures accounts, and supports cryptocurrencies like USDT, USDC, BTC, ETH, and more.
In 2023, the Indonesian exchange Indodax introduced a Proof of Reserves (PoR) system.
Kreston Indonesia, a well-known public accounting firm, later verified this system. Kreston confirmed the Agreed-Upon Procedures (AUP) for the PoR and published the AUP report on April 18, 2023.
As part of the verification, Kreston Indonesia ensured that Indodax’s payment gateway cash and receivables exceeded the total liabilities owed to its members.
Additionally, they confirmed that the exchange’s crypto asset balance was more outstanding than the total portfolios held by its members on the same date.
Indodax’s implementation of a verified Proof of Reserves system adds a layer of transparency and trust for its users.
BingX has taken robust steps to ensure transparency and security by offering real-time reserve verification and working with a trusted auditor like Mazars.
BingX ensures 100% backing of customer funds with its reserve assets.
By using the Merkle tree, the platform allows users to verify these reserves independently. The exchange updates its Merkle Tree on the 1st and 15th of each month, ensuring transparency.
BingX’s Proof of Reserves (PoR) audit is handled by third-party firm Mazars.
According to their verified reports, BingX’s cryptocurrency holdings are over-collateralized, with collateralization ratios of 102.27% for BTC, 111.56% for ETH, 119.73% for USDC, and 166.25% for USDT.
This means the exchange holds more than enough reserves to cover all user assets.
Customers can now verify these figures in real-time on the BingX Merkle Tree Verifier page, giving them confidence that their assets are securely held.
After the collapse of FTX, Bitfinex, like many other major exchanges, introduced a Proof of Reserves (PoR) system to assure users of its financial transparency.
At the time of implementation, Bitfinex’s PoR statement revealed it held $5.06 billion worth of assets. Of this, $3.36 billion was in Bitcoin, making up most of its reserves.
The remaining assets were distributed across Ethereum ($1.49 billion), USDT ($88 million), and USDC ($55 million). These holdings were stored across 135 cold and hot wallet addresses.
To ensure transparency, Bitfinex partnered with BitGo to develop the world’s first real-time proof-of-reserve Bitcoin exchange.
The exchange publishes its public wallet addresses and PoR reports, allowing users to verify their assets. Users can compare Bitfinex’s on-chain wallet balances with the total assets held by the exchange to ensure solvency.
In addition, Bitfinex announced plans to revive Antani, its open-source custody solution, which will enhance its proof-of-solvency system.
The Seychelles-based exchange Huobi uses a Merkle tree-based Proof of Reserve (PoR) system to ensure that user assets are backed at a minimum ratio of 1:1.
The exchange publishes monthly PoR reports, easily accessible on its platform for users to verify their account data.
The PoR system covers a variety of assets, including USDT, BTC, ETH, HT, and TRX. Huobi maintains high reserve ratios for popular currencies, with current reserves for Bitcoin at 100%, ETH at 101%, and USDT at 100%.
The exchange also offers a 100% withdrawal option, meaning it has enough funds to meet all customer withdrawal requests, ensuring transparency and security for its users.
Bitget implemented its proof of reserve system in 2022.
As one of the most popular exchanges globally, Bitget claims to hold 100% of users’ assets in reserve, ensuring it can facilitate 100% withdrawals and continue operating.
To prove its solvency, Bitget uses the Merkle tree method, which allows users to verify the assets held in the exchange’s wallets. By 2025, the Merkle tree had 26 layers and recorded 20,664,650 entries, reflecting all balances on the platform.
Bitget releases snapshots of all assets in its wallets each month, making these publicly available. User-specific details are also published monthly after all sensitive user data is removed to protect privacy.
Bitget holds over 100% of user assets in major cryptocurrencies like BTC, ETH, USDT, and USDC and boasts a total exchange reserve ratio of 168%.
BitMEX rolled out its Proof of Reserves (PoR) system in 2021 with a refreshingly simple approach.
Unlike other exchanges that rely on complex cryptographic methods like Merkle trees, BitMEX keeps things straightforward. It publishes a clear, easy-to-understand list of all the Bitcoin it holds on behalf of its clients.
This list includes Bitcoin addresses, the balance at each address, and the execution scripts for every UTXO (Unspent Transaction Output).
To check these reserves, anyone can download the file and take a look. For those who want to go further, BitMEX offers a tool to reconcile the UTXOs with the Bitcoin blockchain, which can be done by running Bitcoin Core.
The crypto space can be highly profitable but is also rife with deceptions, thefts, and losses. This makes it essential for exchanges to implement active Proof of Reserve (PoR) initiatives.
Today, users increasingly choose platforms that have a PoR system in place, as it offers transparency and reassurance that their assets are fully backed.
A Merkle tree is a cryptographic data structure designed to verify the integrity and consistency of large data sets efficiently.
It consolidates large amounts of data into a single structure, known as the Merkle root, by hashing different data blocks and combining them into a single hash. This structure is also called a hash tree.
In the context of a crypto exchange, the Merkle tree summarizes the assets the exchange holds into the Merkle root.
Each user’s account balance is part of this structure, allowing users to verify that their balance is accurately included within the exchange’s total holdings without revealing individual account details.
Here’s how Proof of Reserves works in practice:
Snapshot of Reserves: The exchange provides a public snapshot of its assets held in custody, often done through publishing wallet addresses or cryptographic proofs.
User Balances Verification: Users are given tools, like Merkle trees (a cryptographic structure), to verify that their balances are included in the exchange’s reserves without revealing sensitive information.
Third-party Audits: Many exchanges undergo independent audits to validate further that their reported reserves match the assets held, enhancing transparency and trust.
By implementing Proof of Reserves, crypto exchanges reassure users that their funds are secure and that the platform holds sufficient liquidity to meet all withdrawal demands.
This approach helps build trust in the exchange, reducing the risk of insolvency or mismanagement of customer funds.
Without PoR, users must rely solely on the exchange’s word regarding the security of their funds. This lack of transparency increases the risk of insolvency or fraudulent behavior, which can lead to significant user losses.
Both process have their pros and cons. Third-party audits bring external validation but may lack real-time transparency. On-chain PoR offers more immediate transparency, allowing users to verify reserves through blockchain data.
Not really. While PoR can reassure users that an exchange has enough reserves, it doesn’t prevent insolvency entirely. Exchanges may still have liabilities that PoR doesn’t account for, making it essential for users to assess both PoR and overall exchange practices.
Ayanika is an experienced content writer with a background in Hotel Management and a master's in hospitality administration from IHM Calcutta. With her expertise in content creation and copywriting, Ayanika has collaborated with numerous companies across various sectors. She's currently focusing on the crypto and investment sectors and crafting in-depth pieces about different aspects of the crypto space.
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