The collapse of FTX, one of the leading crypto exchanges, sent shockwaves in the digital asset space.
With the liquidity issue being a primary contributor to the FTX crisis, the proof-of-reserves concept has engulfed the crypto sector, with more exchanges gearing towards showing more transparency. Crypto exchange Gate.io explained:
“What is Proof-of-Reserves? An audit by a 3rd party ensuring that a custodian holds the assets it claims to. A snapshot of all balances held is taken & aggregated into a Merkle tree, a privacy-friendly data structure encapsulating balances.”
As a data structure, a Merkle tree or Hash tree prompts data verification and synchronization. Therefore, it utilizes hash functions for data integrity and transparency purposes.
Binance CEO Changpeng Zhao (CZ) prompted the proof-of-reserves trend after pointing out that it would propel the crypto exchange’s transparency about its digital asset holdings….
