Crypto exchange OKX has publicized a Proof of Reserves page on its website that enables users to audit its reserves to ensure it is solvent. The page reveal comes when crypto exchanges are under scrutiny after the FTX collapse.
Why Proof of Reserves?
OKX believes its greatest responsibility and top priority is to make sure that consumers’ funds are safe and secure at all times. The exchange says it maintains always maintains 1:1 reserves and embraces its long-standing reputation for best-in-class security.
In their blog post, the company mentioned more details about why proof of Reserves is important and how it works. The main aim is to empower clients with greater transparency than ever before via Proof of Reserves (PoR).
How does OKX’s Proof of Reserves work
Proof of Reserves is a common audit process used to verify a custodian holds sufficient funds to cover all assets held on their exchange.
There are three key steps in the method to verify the audit.
1. OKX says it will use a verification procedure called “Merkle tree”. It is basically a data structure designed to encrypt data securely, to confirm all the user assets held on the exchange.
2. They will verify their ownership of OKX on-chain wallet addresses and the total OKX wallet holdings.
3. In the final step, they will verify their reserve ratio by comparing total user asset holdings with total exchange assets from their on-chain wallet addresses.
For checking if the address is in the Merkle tree or not the exchange will take a snapshot of every eligible user’s Trading, Funding, and Grow accounts, and each user is offered a unique anonymous user hash ID. Each user’s total asset balance is a “Merkle leaf” in the tree. Combining the entire sum of all the user’s assets will produce a “Merkle root”, a cryptographic signature that will represent all user holdings.
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For more information on how to verify OKX’s ownership and balance of the wallet address through its latest reserve snapshot file and open-source reserve verification tool, you can refer to the following article.
The exchange has been in many deals and partnerships in recent times and the latest endeavor might just be a key to regaining consumer trust in cryptos.
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