What Is Proof of Reserves? How to Actually Read One

Proof of Reserves is how an exchange uses cryptography (a Merkle tree) to publicly show it holds enough assets to cover user deposits. But it has a key blind spot: it proves assets, not liabilities. Here is what it can and cannot prove, and how to read it sensibly.

Proof of Reserves is how an exchange uses cryptography (a Merkle tree) to publicly show it holds enough assets to cover user deposits. But it has a key blind spot: it proves assets, not liabilities. Here is what it can and cannot prove, and how to read it sensibly.