Like us, in looking for a partner, of course, we must assess the criteria for our candidate from various aspects. What is the attitude to the way the partner manages his finances?
This will appear when our partners and we are mutually open (transparent) to each other in various aspects of life so that mutual trust appears.
It’s the same when we choose a partner to choose a trusted crypto exchange to place crypto assets. Trust is also needed itself.
This feeling will emerge with transparency in several aspects, including “Proof Of Reserve.”
What is Proof of Reserve?
Proof of Reserve (PoR) refers to verifying that a crypto trading platform or company has backing in all the digital assets it manages on behalf of its clients.
So, PoR is a transparent auditing practice for cryptocurrency trading companies that provides reports on the company’s reserves.
Why Exchange Issues Proof of Reserve?
The crypto exchange is the most traded crypto company in the world, judging by the highest trading volume & value of customer assets.
PoR is recommended for any crypto company that acts as a custodian because PoR is verifiable proof that customer funds are safe.
This gives customers confidence that crypto companies are not at risk of a liquidity crunch, and customers can withdraw their funds at any time.
How Does POR Work?
PoR provides financial transparency regarding crypto company balance sheets, especially customer funds.
Third-party audits also give customers confidence that their crypto company has sufficient liquidity to carry out daily operations and, most importantly, process withdrawals or customer withdrawals.
Advantages of POR Audits
PoR provides financial transparency regarding crypto company balance sheets, especially customer funds.
Audits from third parties also give customers confidence that the crypto companies they use have sufficient liquidity to carry out daily operations.
Not only that, the most important thing is being able to smoothly process customer and customer withdrawals, or what is more commonly known as customer withdrawal.
POR limitations
With PoR, it does help ensure the security of customer funds (customer assets). From a crypto perspective, it proves that the company has sufficient liquidity but can also give users a false sense of security.
How did it happen? Because only by providing a snapshot is the exchange an overview of the assets required for the platform.
But sometimes, it does not disclose the company’s obligations to the customer, which means users have to rely on the results of the auditor’s examination of the relevant assets.
This could lead to an exchange using its reserve certificates to appear transparent without disclosing its solvency risk.
Conclusion
Proof of Serve is a transparent auditing practice for cryptocurrency trading companies that provides reports on company reserves.
The advantage is that it can provide financial transparency about the balance sheets of crypto companies, especially customer funds. Third-party audits also provide customer confidence.
Those are some discussion materials about Proof Of Reserve which will add to our knowledge of Blockchain, the due diligence of the crypto exchange itself, and various kinds of derivative things.
Back to transparency & trust, for those of you who want to get involved in crypto investment, INDODAX can be one of the most trusted, oldest Crypto Exchanges and has gone through the proof of reserve audit stage in Indonesia.
So, there’s no reason to delay learning crypto investing from today. Open your account balances as an individual user for more established future assets!
