Binance Unveils Bitcoin Proof-of-Reserves System Post-FTX Collapse
Binance launches a proof-of-reserves website for its Bitcoin holdings, revealing a 101% reserve ratio. The system uses a Merkle tree to let users verify their balances are fully backed by the exchange.
Cryptocurrency exchange Binance launches a new proof-of-reserves system starting with its Bitcoin holdings to improve transparency. The company reveals a reserve ratio of 101%, meaning it holds enough BTC to cover all user balances. This move follows the recent collapse of FTX, which faced a severe liquidity crisis and failed to process customer withdrawals.
Unlike Binance's previous attempt at transparency that only shared wallet addresses without clarifying ownership, this new system explicitly separates user funds from corporate holdings. Users collectively hold 575,742 BTC, worth around $9.5 billion, and Binance confirms its wallets contain over 100% of that amount. However, customers still rely on the company's word that corporate funds remain on a separate, unverifiable ledger.
To verify individual account inclusion, Binance utilizes a Merkle tree structure that cryptographically seals user balances across Spot, Margin, Futures, and other products. The exchange provides a Python script so users can independently check that their specific accounts exist within the snapshot. Despite this technical progress, significant work remains before crypto exchanges achieve full, trustless transparency regarding fund management.