While progress has been made in establishing criteria and rankings for PoR, there are still open questions about how to conduct it and who should do it. The main difference between PoR and proof of assets is that PoR involves verifying assets and liabilities, which auditors have struggled to do in real time. CeFi platforms present particular challenges for PoR because liabilities can be incurred off-chain, making it difficult to show that a company can honor customer deposits.
In contrast, DeFi platforms have more transparent systems, such as the zero-knowledge Ethereum Virtual Machine (zkEVM) developed by Polygon, which uses Merkle trees to verify both positive and negative balances while maintaining privacy. Centralized cryptocurrency exchanges are also taking steps to provide PoR, including OKX's use of a Merkle tree protocol and the Nansen dashboard for real-time transaction tracking. However, good conduct requires good regulation and a culture of compliance in addition to technical solutions.
Challenges Remain for Proof of Reserves (PoR) in Centralized and Decentralized Finance
PoR has become a critical issue in the crypto industry as a way to rebuild trust after the recent crypto winter. While progress has been made in establishing criteria and rankings for PoR, there are still open questions about how to conduct it and who should do it. Traditional auditors have struggled to provide PoR in real-time, and the CEO of Digital Asset Research (DAR) has suggested that they may never fully meet users' needs. DeFi platforms, on the other hand, have more transparent systems, such as the zero-knowledge Ethereum Virtual Machine (zkEVM) developed by Polygon, which uses Merkle trees to verify assets and liabilities while maintaining privacy.
CeFi platforms present particular challenges for PoR because liabilities can be incurred off-chain, making it difficult to show that a company can honor customer deposits. Centralized cryptocurrency exchanges are also taking steps to provide PoR, including OKX's use of a Merkle tree protocol and the Nansen dashboard for real-time transaction tracking. However, good conduct requires good regulation and a culture of compliance in addition to technical solutions.
PoR Development and Adoption Grows, but Centralized Exchanges Face Unique Challenges
As the crypto industry looks to rebuild trust after the recent crypto winter, Proof of Reserves (PoR) has gained significant attention. Criteria and rankings for PoR are beginning to emerge, but there are still open questions about how to conduct it and who should do it. While traditional auditors have struggled to provide PoR in real-time, decentralized finance (DeFi) platforms, have more transparent systems, such as the zero-knowledge Ethereum Virtual Machine (zkEVM) developed by Polygon.
CeFi platforms present unique challenges for PoR because liabilities can be incurred off-chain, making it difficult to show that a company can honor customer deposits. Centralized cryptocurrency exchanges, such as OKX, are taking steps to provide PoR through open-source protocols and real-time transaction tracking tools. However, the CEO of Digital Asset Research (DAR) has emphasized the importance of good regulation and a culture of compliance in addition to technical solutions for ensuring good conduct in the industry.
PoR Criteria and Rankings Emerge, but Centralized Exchanges Struggle with Compliance
As the crypto industry looks to rebuild trust after the recent crypto winter, Proof of Reserves (PoR) has gained significant attention. While progress has been made in establishing criteria and rankings for PoR, there are still open questions about how to conduct it and who should do it. Traditional auditors have struggled to provide PoR in real-time, leading to frustration among users. In contrast, decentralized finance (DeFi) platforms have more transparent systems, such as the zero-knowledge Ethereum Virtual Machine (zkEVM) developed by Polygon, which uses Merkle trees to verify both assets and liabilities while maintaining privacy.
CeFi platforms present unique challenges for PoR because liabilities can be incurred off-chain, making it difficult to show that a company can honor customer deposits. Centralized cryptocurrency exchanges, such as OKX, are taking steps to provide PoR through open-source protocols and real-time transaction tracking tools. However, the CEO of Digital Asset Research (DAR) has emphasized the importance of good regulation and a culture of compliance in ensuring good conduct in the industry.
