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After some crypto leaders claimed Binance’s “proof of reserves” as pointless, Binance CEO Changpeng “CZ” Zhao stated Merkle Tree-based proof of reserve as “healthy checks.” Binance CEO in a blog on Saturday answered how funds are managed at Binance to ensure full transparency and secure customers’ crypto assets.
Binance CEO “CZ” Responds to Transparency on Wallets
In a blog post on November 26, Binance CEO “CZ” answered community questions about how Binance manages funds and wallets. He claims Binance commits to ensuring full legal and regulatory compliance and does not use client funds on its own accounts.
Binance holds customers’ crypto assets in separate accounts. These are completely different from accounts used by Binance to hold its crypto assets. Moreover, the crypto exchange uses the same wallet infrastructure to secure user assets, as well as Binance’s crypto assets.
Users’ deposits move to deposit wallets and Binance periodically moves these coins to a hot or cold wallet based on transaction amounts. It helps minimize the number of transactions and keep gas fees minimal, ultimately passing these savings to customers by keeping the trading fees at the lowest in the industry.
Binance maintains a balance in hot wallets to manage deposits and withdrawals. However, large deposits and withdrawals are managed through cold wallets. Moreover, each customer has a unique identifier (UID) and associated login credentials, which helps distinguish customers’ crypto assets from Binance’s assets.
Furthermore, Binance started working on segregated on-chain customer crypto-asset wallets to comply with the MiCA Regulation. It also uses its own wallet infrastructure to secure customers’ assets.
“Creating a self-sufficient ecosystem has shielded Binance customers from being exposed to the types of contagion risk we have seen with the implosions of other industry players like Celsius, Voyager, and now FTX.”
Is Merkle Tree Proof-of-Reserves the Best Way to Verify Assets?
Kraken CEO Jesse Powell called Binance’s proof of reserves “pointless” as exchanges fail to include liabilities without an audit. Binance CEO believes Merkle Tree-based proof of reserves is the best way to verify crypto assets.
He responded to Jesse Powell’s claims by revealing that third-party auditors will be involved in Binance’s proof of reserves.
“I said multiple times publicly, the bottleneck was the auditors has a few weeks wait. We move forward in incremental steps.”
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