Paradise of Proof ✍🏻

Hey mate, how are you keeping so cool when everyone around is just running here and there for auditing and releasing proof-of-reserves. Uhh! Yes we've discussed the meaning of proof-of-reserve earlier. Here we go 🚀

The Shubh Shuruat

Crypto exchanges are actively releasing proof-of-reserves audits in order to build transparency but experts believe it would take more than that to regain investor trust.

In the wake of the FTX collapse that came about as a result of the now-bankrupt cryptocurrency exchange funnelling user funds to mitigate its own risks, crypto exchanges came up with a transparency solution called proof-of-reserves.

The Auditing Process

A practice, which was recently endorsed by Binance CEO Changpeng Zhao, offers a way for exchanges to show provide transparency to users in the absence of clear regulations.

A Merkle is a cryptographic commitment scheme in which each “leaf,” or node, is labeled with a data block’s cryptographic hash. Their chief use to is to verify data that has been handled, sent or stored between computers. While invented in 1979, the concept has found extensive use in blockchain peer-to-peer networks.

After taking the snapshot, the auditor obtains a Merkle root: a cryptographic fingerprint that uniquely identifies the combination of these balances at the time when the snapshot was created.

That's it for the day nerds, Web3Shala Signing Off ✌🏻

Have a nice day :)Keep Learning 🙏🏻