Proof of Reserves

Proof of Reserves is an auditing technique for crypto exchanges and other VASPs. 

By using Proof of Reserves, an exchange can show how many assets it has at any time.

Proof of Reserves can be used

• In the instance of stablecoins (asset referenced tokens and electronic money tokens), to provide evidence that the exchange has sufficient assets backing their tokens, 

• To prove customer deposits correspond with the crypto assets in custody.

An exchange can prove its asset reserves in various ways, such as

• Merkle tree proofs, 

• Third-party audits, or 

• Separation of reserves into off-chain and on-chain, as seen in many blockchain analytics companies.