After the FTX collapse, with less trust in centralized exchanges, many users scrambled to transfer their assets off the platform, which in turn caused a clamor to introduce or publish Proof of Reserves. Where the collapse of FTX had put trust in jeopardy and was seen as an emergency response, the transparency of a crypto exchange was made a real measure to be used through projectors. Proof-of-reserve proponents state that this full use of audit methodology will give users a sense of confidence and assurance that crypto exchanges are not misusing their funds. While the crypto industry is clearly adopted and legitimized by many, presenting PoR audits does not prove that no exchange is misusing these funds. If we also allege that some crypto exchanges are lending funds to each other, they are also processing the return immediately after proof-of-reserve submission.
Martin Hisbeck, a crypto analyst and head of blockchain and crypto research at the multi-asset digital trading platform Uphold, argues that this is not a suitable tool to prove the state of the store of change because all the deities are too well represented. And according to Hizbeck this makes POR more and more incomplete and at worst “at worst and misleading and false”.
Hiesboeck states that there is a clear reason why some people in the cryptosphere have not supported PoR, while also taking into account the belief that Merkle tree PoR has seen an increase in adoption and interest in its potential areas over the past few weeks. A public emergency process has begun to provide and rekindle the public trust and immense user interest in centralised exchangers that we needed and that is why the proof of reserve method has become so popular that currently It was seen as the best option to prove the excellent quality of the exchange and to prove its transparency and was considered as a way of cutting edge technology.
Martin Hisbeck clearly states that such proofs are highly vulnerable misrepresentation and that PoR alone is not the only useful method of verifying an exchange’s reserves as it may not match liabilities and assets at all. Has an account.
