Proof Of Reserves Has Become The New Industry Standard In Crypto Markets

(MENAFN- B2Press) As the adoption of cryptocurrencies by traditional markets begins, the necessity for centralized exchanges (CEXs) to transparently share their liabilities and responsibilities has increased. Reports known as Proof of Reserves (PoR) have become indicators closely monitored by users for asset security.

TURKEY - The bankruptcy of a globally recognized Cryptocurrency exchange within a few days at the end of 2022, due to the misuse of customer funds for unintended purposes, brought about a new obligation among centralized cryptocurrency exchanges. Leading cryptocurrency exchanges, aiming to gain a competitive advantage, rebuild investor trust, and openly inform the public about their financial sustainability, rolled up their sleeves to make Proof of Reserves reports more comprehensible. Gate, a global cryptocurrency exchange and Web3 company that has been encouraging the industry on the Proof of Reserves issue since 2020, took significant steps to turn Proof of Reserves into an industry standard within 4

Gate's Global Growth Director, Kafkas Sönmez, shared his assessments on the subject, saying, "Especially the last months of 2023 marked a turning point for cryptocurrencies. This period, when governments began to scrutinize and thus recognize their existence, institutional investor interest increased, and the pieces in the market settled more, increased transaction volumes and market size, and now imposed more governance responsibilities on cryptocurrency exchanges. Proof of Reserves reports should also become an industry standard among centralized exchanges."

Gate, which published its first Proof of Reserves report in the last days of January 2023, announced that it had $4.3 billion in assets, with the ratio of this asset to customer funds being 115%. In other words, the exchange confirmed that it held an additional $584 million worth of assets beyond customer funds. The exchange, which added 59 digital assets to the previous report, providing Proof of Reserves for a total of 171 cryptocurrencies, surpassed its competitors with this figure.

Kafkas Sönmez, noting that Gate has played a pioneering role in Proof of Reserves reports since 2020, said, "Gate was one of the first exchanges to start publishing Proof of Reserves by combining the method known as the Merkle Tree with the services of independent third-party audit firms. Then we experienced the bankruptcies in 2022, and subsequently, we made our method open source. In 2023, with the development of blockchain technologies, we took Proof of Reserves reporting a step further by using zero-knowledge-based methodologies such as ZK-SNARK."

Even during the period when they used the combination of the Merkle Tree and audit firms, Kafkas Sönmez mentioned that they thought the process needed to be further simplified so that the average user could grasp the concept of Proof of Reserves, saying, "Understanding the Merkle Tree and zero knowledge (ZK) technology can be complex for people without technical knowledge. However, when we publish all the data, source codes, and tools, our user community can work together to find flaws or perfection in our data. Today, blockchain technologies also make this possible. When we started our Proof of Reserves applications, our users had to trust us and our audit firm. But now, with the ZK methodology, which offers the possibility of verification without sharing sensitive information, they can choose to trust only the technology and what it brings. When the verification process is simplified, trust also increases."

Especially noting that corporate users and high-net-worth investors closely follow Proof of Reserves applications, Gate's Global Growth Director, Kafkas Sönmez, concluded his remarks with the following statements: "Corporate companies conduct a status check process when choosing the platform to transact with high values and apply strict security and compliance rules. Today, Gate, serving thousands of corporate customers worldwide, creates rules and outcomes that ultimately benefit individual investors with the high security and reliability standards it maintains to satisfy all its customers. Gate aims to have not only for its centralized exchange but also for Web3, a very strong security system at the ecosystem level. In 2024 and beyond, we will invest more in security and cooperation.

Contact: Tülay Genç | [email protected] | +31 30 799 6022

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