Kraken’s CEO Jesse Powell has lashed out at Binance, calling its proof of reserves to be pointless as it lacked “proof-of-liabilities”. Following the failure of the cryptocurrency exchange FTX, it was discovered that FTX had loaned out a sizable part of its customers’ assets as per their bankruptcy filings. As a direct result of this, prominent exchanges have been scrambling to reassure users about their proof-of-reserves and to push transparency in the market.
Binance Reveals Proof Of Reserves
Binance was one of the first crypto exchanges to reveal their proof-of-reserves, and it wasn’t long before numerous other crypto firms followed suit. However, these earlier proof-of-reserves were nothing more than the balances of the cold wallets belonging to the exchanges.
Read More: Crypto Exchanges Rush To Provide Proof-of-Reserves Following FTX Crisis
With Binance finally launching its Merkle Tree proof-of-reserves with cryptographic evidences, the exchange tried to set a benchmark for the industry. However, Jesse Powell took to Twitter to critique Binance’s reserves by saying,
“I’m sorry but no. This is not PoR. This is either ignorance or intentional misrepresentation.”
The Kraken CEO further went on to state that the whole point of coming out transparent was to understand whether a crypto exchange had more crypto in its custody than what it owed to its clients.
I’m sorry but no. This is not PoR. This is either ignorance or intentional misrepresentation.
The merkle tree is just hand wavey bullshit without an auditor to make sure you didn’t include accounts with negative balances. The statement of assets is pointless without liabilities. https://t.co/b5KSr2XKLB
— Jesse Powell (@jespow) November 25, 2022
CZ Responds To Jesse
In response to Jesse’s remark, CZ noted that, it was “in crypto” that exchange owners pointed out at each other publicly and he thought them to be beneficial for a healthier crypto environment.
In crypto:
Brian A and Jesse P say FTX is an “overseas exchange” problem, even though SBF is American.
I tweeted questions about Coinbase/Grayscale. Brian answered it.
Jesse questions Binance’s Proof-of-Reserves today. We will answer it.
I view these as healthy checks.
— CZ
Binance (@cz_binance) November 25, 2022
Newer Tokens & Audits On The Way
While releasing its reserves to the public, Binance announced that it would initially start with its Bitcoin holdings, and will add additional tokens & networks in the coming weeks. Zhao also mentioned that the inclusion of third-party auditors was currently in the process.
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