The Crucial Role of Proof of Reserves in Crypto

Ftx and other top exchanges collapse saga increases skepticism in this industry. Imagine exchanges using user’s money for different purposes or not holding the right customer's assets as required. The collapse of these exchanges warrants a strategic step to safeguard this industry against such a scenario because it affected the reputation of crypto by exposing the lack of transparency and accountability of exchanges in the industry. The idea of Proof of Reserve, a mechanism designed to verify that a cryptocurrency exchange or platform holds sufficient assets to cover the value of its users' deposits, was aimed at cleaning this industry of bad players.

This idea became a yardstick for the measurement of solvent and insolvent exchange in the industry. It also discourages exchanges from mishandling user funds and increases the stability of the crypto market. Some exchanges easily welcomed this idea and were quick to showcase their POR to reinstate trust in the industry. While most exchanges stopped announcing their POR, Bitget has maintained a monthly POR declaration which also shows the exchange's commitment to protecting users’ funds.

While Proof of Reserves is a vital tool in safeguarding the crypto ecosystem, it is vital to know that regular declaration by exchanges increases user's trust, and further cleanses this industry of bad players, and contributes to a more stable and mature crypto market.