OKX publishes a second proof-of-reserve report to reassure clients

OKX publishes a second proof-of-reserve report to reassure clients

The second proof-of-reserve (POR) report from OKX has been made public. On the 22nd of every month, the exchange has pledged to publish reserve reports for openness.

OKX has declared a self-audit feature for users to check the security of their assets. The tool employs the Merkle Tree technique to generate an ID for each account. The “Merkle leaf” in the tree represents the user's asset balance. When all users' “Merkle leafs” are added together, the resulting “Merkle root” represents the total value of their holdings on the platform.

OKX publishes a second proof-of-reserve report to reassure clients
Audit date (UTC+8) 12/20/2022, 14:00:00

A Merkle tree can be a valuable tool for proving funds on hand in a cryptocurrency trading platform. However, the integrity of a Merkle tree-based proof of reserves hinges on the integrity of the data it is built upon and the security of the hash function used to generate the tree's hashes. The validity of the proof of reserves is questioned if either of these two factors is in doubt. There are other methods exchanges can use to prove they are solvent and can honor customers' deposits and withdrawal requests besides using Merkle trees. For instance, markets may let third-party auditors check their books to ensure they have sufficient capital. They might use extra precautions like cold storage and multi-signature protocols to safeguard their customers' money.

A Merkle tree

OKX agrees that these precautions are necessary. Customers can use tools like OKX's “VerifyAddress” or the famous “Nansen” to confirm that they are the rightful owners of the addresses associated with their cryptocurrency holdings, even though OKX has not yet implemented any third-party verification platforms. In addition, OKEx has stated that they keep 95% of customer funds in an offline storage system. OKX's publication of proof of reserve reports is encouraging. Still, the U.S. Securities and Exchange Commission (SEC) cautions crypto market investors to put only a little stock in the reliability of exchanges' PoR reports.

Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.



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