Proof of Reserves
A cryptographic method, typically using a Merkle tree, that lets customers verify an exchange actually holds the assets it claims to.
Proof of reserves is a cryptographic method, typically built on a Merkle tree, that lets an exchange or custodian's customers independently verify it actually holds the assets it claims to hold on their behalf, rather than relying solely on the organization's own reporting.
It's a distinct, more cryptographically verifiable concept than a traditional reserve attestation (a third-party report, generally used for stablecoin issuers specifically) — see Kaavon's dedicated "What Is Proof of Reserves?" guide for exactly how it works and its real, documented limitations.
Examples
- A customer can use a Merkle proof from an exchange's published proof of reserves to confirm their own balance was genuinely included in the published total.
- A proof of reserves demonstrates asset custody at one point in time — it isn't equivalent to a full, independently audited solvency check.
Learn more
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