Binance has announced that its Proof of Reserves (PoR) system, implemented two years ago, verifies that all user assets are backed 1:1. This system is presented as a measure of transparency in centralized exchanges within the digital asset sector.
According to Binance, the PoR system originally utilized Merkle tree cryptography to verify user assets but shifted to zk-SNARK protocols in 2023 to address privacy and security concerns raised by the community. This zero-knowledge proof technology enables Binance to validate that user funds are backed without exposing individual account balances.
With recent updates, Binance's PoR system now includes user collateral and debt information, offering a more comprehensive overview of user assets, especially for those participating in lending. By integrating this data, Binance aims to address potential gaps in liability reporting, adding a layer of transparency around users' full financial positions on the platform.
Binance has open-sourced its PoR code to encourage industry-wide adoption and improvement of reserve verification practices. The company provides resources on proof of reserves through Binance Academy, such as articles and glossaries on concepts like zk-SNARKs, to promote understanding of reserve transparency and accountability within the digital asset community.
Operating as a major global blockchain platform, Binance features the largest digital asset exchange by trading volume. The company offers a wide range of financial products and services and is known for its comprehensive ecosystem, which includes educational resources, research, charitable initiatives, and an NFT marketplace. In 2022, the platform saw significant activity with an average daily trading volume of $65 billion and 300 billion spot transactions.