Proof-of-Reserves for Bitcoin by Binance, with upcoming for Ethereum.

Key points: 

• Binance launched its Proof of Reserve (PoR) system.
• The rollout will initially start with BTC, with more coins and networks to be added in the coming weeks.
• Binance has funds covering all of our users’ assets 1:1 as well as some reserves. 
• Users can also verify their personal Bitcoin holdings on the exchange via a provided link or against Binance’s own Merkle Tree.
• CZ also revealed that the exchange was working on a new PoR protocol powered by Vitalik Buterin.

Binance, the world’s largest cryptocurrency exchange by trading volume, launched its Proof of Reserve (PoR) system, the “next step” in its commitment to transparency and fostering trust in the ecosystem.

According to the official announcement, the rollout of the PoR system will initially start with Bitcoin (BTC), with more coins and networks to be added in the coming weeks.

“When we say Proof of Reserve, we specifically mean the assets we hold for our users,” Binance said. “This means we provide evidence that Binance has funds covering all of our users’ assets 1:1 as well as some reserves.”

More specifically, at 23:59 UTC on November 22, 2022, Binance provided a snapshot of the account balance and its own Bitcoin reserves.

The exchange claims to have 582,485 BTC in its reserves, while its users have a net balance of 575,742 BTC, giving Binance a 101% reserve ratio.

Two Ways to Check Your Bitcoin Holdings

Users can also verify their personal Bitcoin holdings on the exchange via a provided link or against Binance’s own Merkle Tree, a cryptographic tool that consolidates large amounts of data into a single hash.

As Binance explained, after logging into the exchange, users can click on “Wallet” and then click on “Audit,” which will generate a unique record ID that confirms that the assets are covered and the user’s account balance at the time of the transaction confirmation audit.

“For those who want to go a step further and independently verify their funds, they can copy the source code into a Python application and reference it themselves,” Binance said in a statement.

Binance further stated that it also plans to bring in external auditors to review its PoR system and implement zero-knowledge proof technology (zk-SNARKs), a move designed to "improving privacy and robustness, and proving the total net balance (USD) of each user is non-negative."

The news follows the collapse of rival exchange FTX earlier this month, prompting a host of other trading platforms to promise “full transparency” via Merkle Trees.

Binance previously released a snapshot of hot and cold wallet addresses as of November 10, and CEO Chanpeng “CZ” Zhao later revealed that the exchange was working on implementing a new proof-of-reserve protocol powered by Ethereum co-founder Vitalik Buterin.