Bybit exchange CEO reveals the principle of storing client assets
The exchange will develop its own model using Merkle Trees and involving auditors
16.11.2022 - 10:00
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What’s new? Ben Zhou, CEO of cryptocurrency exchange Bybit, held an AMA (Ask Me Anything) session on YouTube, in which he shared information about the platform’s clients’ funds storage model and his opinion on the procedure to provide proof of solvency by other crypto exchanges. According to Zhou, 80% of Bybit’s client funds are stored in cold wallets and 20% are stored in hot wallets.
What statements have been made? Due to a large number of withdrawal requests in recent days, some funds have been transferred to hot wallets to speed up their processing.
In addition, Zhou spoke out about the model of providing proof of reserves by trading platforms. According to the head of Bybit, it is not enough for exchanges to publish snapshots of reserves, as there are liabilities on the balance and other parameters that are important to consider. Simply publishing wallets does not show whose money it is — borrowed or own.
Bybit is currently working on its own system with auditors that will allow it to publish credible data that all client funds are safe. In addition, the proof of reserve model will be based on the Merkle tree algorithm.
Merkle trees organize data (such as transactions in smart contracts or transfers between accounts) into hashes arranged as a series of parent and child nodes, which theoretically allows a third-party auditor to verify the relevance of reserves in cryptocurrency services.
On November 15, the Huobi exchange reported $3,5 billion in reserves. The company promised to re-audit with the involvement of third-party experts and the use of Merkle trees within 30 days. Earlier, in the wake of the FTX crypto exchange crash, Binance CEO Changpeng Zhao urged other platforms to publish their balance sheet data to boost industry confidence. Binance itself reported $69 billion in reserves. Zhao also announced a collaboration with Ethereum co-founder Vitalik Buterin to launch a new model of proof-of-reserves for crypto exchanges.
To find out which exchanges confirmed their solvency after FTX’s bankruptcy, see GetBlock Magazine’s article.
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