Proof of Reserves (PoR)

A Proof of Reserves (PoR) is an independent audit and a public-facing attestation of a custodian’s reserves, matched up with a proof of user balances (liabilities).

A PoR audit is conducted by a third party that seeks to verify that a crypto custodian holds the assets it claims to on behalf of its clients.

In performing a PoR, the auditor takes an anonymized snapshot of all balances held and analyzes it using a Merkle tree, a cryptographically secured (i.e., tamper-proof) method of verification of assets on reserve that is designed to maintain privacy.

In the wake of the collapse of FTX, there have been increasing calls for crypto exchanges to implement PoR’s.