By George Ward
Nic Carter, a Bitcoin supporter, has entered the proof-of-reserves (PoR) discussion for crypto exchanges. The BTC advocate has released a report where he provided an in-depth analysis of the PoR of CEXs (centralized exchanges).
In addition, Carter ranked the attestations of top cryptocurrency trading platforms such as Binance, Kraken, and BitMEX.
Nic Carter Examines The PoRs Of Famous Crypto Exchanges
Cater used several parameters to conduct his PoR analysis. He used parameters like disclosure of liabilities, attestation of assets in custody, and use of a third-party auditor.
The crypto executive also evaluated the various PoRs, the reported assets, and liabilities and ranked them according to their quality. Meanwhile, two crypto exchanges, BitMEX and Kraken, were at the top of his list.
Carter noted that Kraken provided all its liabilities, giving users high confidence. He applauded the crypto exchange’s plan to conduct PoR every six months.
According to previous reports, Kraken exchange employed a third-party auditor, Armanino, to audit its PoR. Meanwhile, BitMEX scored very high and did not use an auditor like other crypto exchanges.
Instead, the platform adopted a transparent model by publishing the balances of different assets under its custody. BitMEX highlighted all the Bitcoin balances under its care in its assets column.
The firm also provided proof that users can withdraw their assets. For its liabilities, the crypto firm released a complete Merkle tree of clients’ balances.
Carter stated that the exchange has no problem with negative or excluded balances. This is because anyone can assess and evaluate the liability set as it is complete.
Binance Scores Low For Publishing Incomplete Liabilities
Although BitMEX and Kraken received high PoR scores for their transparency, the opposite was the case for Binance. The Zhao-led exchange did poorly based on Carter’s ranking. The Bitcoin supporter stated that Binance received a low-ranking score because its PoR was incomplete.
Carter acknowledged that Changpeng Zhao, the CEO of Binance, had championed the need for PoRs following FTX’s collapse.
According to Carter, the PoR allows investors to verify that they are part of the liability set. Unfortunately, the analyst argued that “the first PoR released by Binance is not convincing enough. The report covered only BTC, just 16.5% of users’ assets in their vault.”
However, the analyst argued that most PoRs do not contain the whole liability list. Hence, this incomplete liability list makes it difficult for third parties to verify the authenticity of such reports.
Earlier this month, an SEC official advised crypto investors not to depend wholly on PoR reports as they could be forged.