Global cryptocurrency exchange OKX has released its fifth edition of its proof-of-reserves (PoR) report, which it began releasing in November 2022, in an effort to increase transparency in the industry. According to the latest edition, OKX holds $8.9 billion across Bitcoin (BTC), Ethereum (ETH) and the Tether stablecoin (USDT). This puts the reserve ratios of BTC, ETH and USDT at 103%, 103% and 102%, respectively. This latest release also comes as the exchange upgraded its PoR system with more transparency by making full liabilities (i.e. the total balance of user deposits) publicly accessible.
Cointelegraph spoke with Lennix Lai, the managing director of Global Institutional at OKX, regarding these extra steps towards transparency. Lai said that recent events in the industry highlight that, “crypto-native challenges require crypto-native solutions.” He added, “The blockchain and crypto/Web3 industry is built on technology that enables trustless transactions on public blockchains, and this inherent transparency is incredibly valuable.”
Many exchanges in the industry – such as Binance, Crypto.com and Bybit – have released such Merkle-Tree-based verification proofs to preserve the industry’s integrity after the FTX liquidation scandal. Lai said that the new mantra of the industry is “don’t trust – verify”, and that over 300,000 users have already viewed the reserves or verified their liabilities on the OKX platform.
The new transparency mechanism that made the total balance of user deposits visible to the public maintains user privacy through a solution known as “splitting leaf nodes”, which splits and shuffles account liabilities in the tree. According to Lai, OKX will also be adding zero knowledge proof to its PoR in the coming weeks.
After the crash of Silicon Valley Bank (SVB), transparency in the greater financial industry has become even more of a talking point. Lai said that during times of uncertainty, such as the banking crisis, “Proof-of-reserves can provide users with real-time, on-chain verification of reserves and liabilities through transparent technology, in this way traditional finance differs from crypto.”
However, on 8 March, the Public Company Accounting Oversight Board, a US-based watchdog overseeing audits of public companies, issued a warning to investors about PoRs. The board said that these reports “don’t provide any meaningful assurance to investors or the public.”
Nonetheless, companies in the crypto industry continue to put efforts into transparency. On 10 February, Binance also upgraded its PoR system to include zk-snarks, a form of zero-knowledge cryptography.
OKX’s latest PoR report marks an important milestone in its transparency efforts. The new mechanism that splits and shuffles account liabilities in the tree through splitting leaf nodes helps maintain user privacy while still maintaining transparency in the industry. OKX’s plan to add zero knowledge proof to its PoR in the near future is a promising development that will help the company further its transparency initiatives. Overall, the latest PoR report by OKX, along with similar updates by other exchanges, is expected to bring greater trust and reliability to the crypto industry.
