What is proof of reserves? Does the exchange hold enough crypto?
Short answer
Proof of reserves (PoR) is an exchange's public check that the crypto it holds covers everything its users have deposited with it. You can usually check that your own balance was counted. Binance and OKX both publish proof of reserves.
- It's a snapshot of a single day. It doesn't prove the exchange will be fine later on.
- It focuses on whether the assets are enough and may not count all of the exchange's liabilities.
In one line
Proof of reserves is an exchange showing, in public, that it holds at least as much crypto as its users have deposited.
An example
For example, on the snapshot day, users have 10,000 BTC on an exchange.
- Its wallets hold 10,500 BTC: enough to cover everyone.
- They hold only 9,000 BTC: not enough. If everyone withdrew at once, some users couldn’t get their BTC out.
Related
FAQ
Does proof of reserves mean an exchange is safe?
Not on its own. It only shows the picture on the snapshot day, and it may not include every liability. Treat it as one signal, not as insurance.
What does the reserve ratio mean?
It's how much of a coin the exchange holds, divided by how much of it users have deposited. For example, a ratio of 105% means it holds 105 coins for every 100 that users have deposited.
Is proof of reserves the same as an audit?
No. In an audit, outside accountants review the whole set of books. Proof of reserves mainly shows that assets cover users' coins, which is a much narrower check.