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Nick Carter dives into Proof of Reserves, Ranking Certificates of Exchange



Bitcoin advocate Nick Carter has released an in-depth analysis of the proof of central exchange reserves and ranked the testimonials offered by some of the most prominent cryptocurrency exchanges in the space.

Carter published Detailed examination of the quality of Proof of Reserves on several exchanges. The cryptocurrency executive used parameters such as certification of assets held and disclosure of liabilities, incorporation of a third party auditor, demonstrating credibility by taking PoR of all assets and adhering to an ongoing procedure to identify the best quality PoRs.

PoR scores from cryptocurrency exchanges. Source: Medium

Cryptocurrency exchanges Kraken and BitMEX topped the list. According to Carter, Kraken, which hired Armanino to prove its reserves, gives customers “a good level of confidence” that there are no hidden obligations. Carter also praised the trading platform’s commitment to executing PoRs every six months.

On the other hand, BitMEX, which also received praise, did not rely on an auditor but chose to go with a very transparent model. On the asset front, the exchange has listed all BTC balances held by the exchange and proof of spendable by BitMEX multisig. Along with its commitments, the company has published the complete Merkle tree of user balances. “This means that there are no problems with excluded or negative balances since anyone can fully examine limited liability,” Carter wrote.


Related: CryptoQuant verifies Binance reserves, and does not report any FTX-like behavior

While some had high scores in terms of PoR scores, the PoR of cryptocurrency exchange Binance did not fare well in the rankings. According to Carter, the exchange’s low PoR score is because PoR is incomplete. The cryptocurrency analyst believes that while Binance CEO Changpeng Zhao (CZ) is highlighting the importance of PoRs after the FTX crash, the CEO has “not yet risen to his challenge.” he wrote:

“Binance’s first PoR does not give strong guarantees. It only covers bitcoin, which is only 16.5% of their clients’ assets.”

While PoR allows individual users to check if they are included in the liability group, Carter said that PoR does not display the entire responsibility list. This makes it difficult for a third party to verify the action according to the resolver.