​OKX begins to provide certificates of proof of reserves

What’s new? The OKX cryptocurrency exchange has announced the launch of the Proof of Reserves (PoR) certificate, through which any client of the platform can check information about the availability of reserves and user funds on the exchange. All details are published on a separate page of the OKX website.

Page with proof of reserves

What else is known about the initiative? According to OKX statements, the exchange maintains a 1:1 reserve ratio for all user assets and provides full transparency of both reserves and funds. All of the exchange’s wallets on the blockchain are public, allowing the authenticity of the information to be verified. In addition, OKX regularly publishes proof-of-reserve audits.

As for how the PoR model works, it is a common audit method used to ensure that an exchange has sufficient funds to cover all assets held on it. The model works as follows:

1. The exchange uses Merkle trees to verify all the user assets held on the exchange.
2. The exchange verifies the ownership of OKX on-chain wallet addresses and the total amount of funds on the wallets of OKX.
3. The exchange verifies the reserve ratio by comparing the total amount of users’ assets with the total amount of the exchange’s assets.

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, after which Binance reported $69 billion in reserves.

Earlier, Bank of America criticized crypto exchanges’ proof of reserves reports. Experts believe that such a model falsifies data to borrow assets just before the publication of reports.

Ben Zhou, CEO of cryptocurrency exchange Bybit, holds a similar opinion. He stated that 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.

To find out which exchanges confirmed their solvency after FTX’s collapse, see GetBlock Magazine’s article.