Maintaining the customers’ trust is essential as it builds a loyal audience for the business and supports its growth. In the crypto exchanges, creating a trustful environment for the audience plays a vital part in gaining its users. One of the major instances that breaks the trust of the user is insecure maintenance of funds. This also impacts the exchange platform quite badly, like bankruptcy.
Secure your crypto exchange’s users with the highly demanded invention called Proof of Reserves (PoR). This offers increased transparency in their reserves. This blog walks you through our PoR Audits for your crypto exchange with its great benefits and lucrative process.
An Introduction To Proof of Reserves
The proof of Reserves (PoR) mechanism is one of the highly on-demand solutions in the present crypto world after the meltdown of the popular crypto exchange FTX. This proving mechanism verifies the investor’s funds in a crypto exchange and shows them unaltered results by independent audits. Both on-chain and off-chain assets are verified to exhibit transparency in the asset management of the crypto exchange.
This mechanism uses a data structure algorithm called Merkle Tree. This utilizes data hashes to verify the transactions on the crypto platform. Most crypto industry experts predict that this PoR mechanism will emerge as mainstream soon enough in the centralized crypto exchanges.
What is the need for PoR?
After the meltdown of Mt.Gox, Quadriga, and recently, FTX, the trust factor among the crypto exchanges and their users has been disrupted. The Proof of Reserves has entered the crypto world to strengthen trust and show increased transparency on the user’s funds. This reserves proving mechanism is a significant upgradation in the crypto verse. It eliminates the liquidity crisis and creates a strong trust between the exchange and its users.
With the presence of PoR, crypto businesses can now be more transparent while maintaining their industry standards. This mechanism stimulates systematic transaction processes with regulatory inspection of the reserve balances to maintain the customers’ trust. It also ensures the safety and security of the user’s funds.
Use cases of Proof Of Reserves
- The Proof of Reserve mechanism efficiently supports the tokenized assets like Stablecoins, Central Bank Digital Currencies (CBDCs), etc.
- The PoR audits simplifies the cross-chain tokenization as its obtains the asset data easily from any blockchain.
- The on-chain Financial Applications like crypto exchanges, lending platforms, etc., can utilize the PoR mechanism to secure the trust of their users.
- The financial venture’s Circuit Breakers in the crypto world are created with the PoR mechanism. Through which the under-collateralization of the reserved assets can be avoided.
Benefits of Proof of Reserves
- The presence of Proof of Reserves on the crypto platforms enhances the transparency of the platform. It also increases the trust among the investors in the platform.
- Utilizing the values of PoR, the investors can verify their crypto reserves. All the while the crypto platform can increase its user base by offering high transparency.
- With the PoR mechanism, the crypto asset issuer for off-chain and on-chain assets can secure the value of the tokens by preventing excess token minting.
- This PoR mechanism is not only for centralized Finances (CeFi). It can also be utilized in Decentralized Finances (Defi) to audit the in-built wallet of a DeFi platform.
The lucrative process of proving the crypto reserves
- Firstly, to prove the crypto reserves of the exchange platform is by hiring third-party auditors to check the asset reserves.
- The crypto auditor collects all the data of the balances in the reserves and wallet of the crypto exchange. These collected data are in the form of Merkle Tree.
- The Merkle Root is set, and the sums of the balances of the accounts are found and added.
- The balances on the Merkle Root are verified with a digital signature on the public blockchain on which the crypto exchange is built.
- The auditor checks the balances and the asset details on the public blockchain network to maintain the transparency of the exchange.
- With regular updates of the assets or balances in the exchange platform, the PoR audits can be viewed by users or investors to check on their funds.
- The PoR audit ensures the security of crypto reserves, wherein any tampering of the reserves disrupts the Merkle tree. By which the customers can be alerted of their funds in the crypto exchange platform.
Why Choose Infinite Block Tech For Proving the reserves of your Crypto venture?
Infinite Block Tech is one of the leading web3 development companies well known for indulging in the latest improvements in web3 and offering prominent services for our clients. Our vast range of development services with the best packages allows you to gain a satisfying experience on your web3 venture. Our Proof of Reserves Audit enables your crypto venture to verify the crypto reserves and build a strong trust between your platform and its users by increasing transparency.
So, if you are a cryptopreneur looking to enter the crypto-verse with your triumphing venture, acquire our eminent crypto exchange development services with PoR integration. Our White-label solutions enable you to customize the exchange platform according to your needs and requirements. With our proficient technical experts we ensure your satisfaction in the crypto exchange. Our on-time delivery and round-the-clock technical support for your crypto exchange are some of the additional factors in choosing.