Binance comes with a ‘proof-of-reserves’ system with which it wants to prove that it has enough bitcoin to pay customers. This seems to be a reaction to the crash of significant competitor FTX.
Crypto exchange Binance has launched a new website explaining its proof-of-reserves system. With this system, the platform wants to show more transparency and prove that it has enough funds to pay customers if they wish to withdraw their money. Binance is already starting with its bitcoin reserve, the most famous cryptocurrency.
Therefore, the site must show that the money changer currently has a reserve ratio of 101% and that the company has enough bitcoins to pay all customers who want to withdraw their money.
The system comes one week after the fall of FTX, a competitor to Binance and a popular crypto exchanger. It eventually succumbed to a ‘liquidity crisis’. In short, the platform had far fewer funds in reserve than were held in customer accounts. As a result, the entire system collapsed when many customers wanted to withdraw their money simultaneously. Binance CEO Changpeng Zhao was one of the first to bring out the lack of reserves at FTX.
Since the crash of FTX, the crypto market, which has not had a good year, has fallen sharply. As a result, many companies, especially exchange platforms such as Binance, want to be more transparent and thus regain customer trust. Binance is already doing that with an overview of its own ‘gold stock’.
