A report on Binance’s BTC reserves was made public by the auditing company Mazars. The auditing company and Binance both came to the same conclusion. The exchange held enough bitcoins and wrapped bitcoins as of November 22 at 23:59 UTC to cover all user balances.
Following the failure of FTX, Binance had already started a proof-of-reserves website to reassure its users. According to Mazars, today’s audit merely provides further evidence that Binance doesn’t seem to be lying.
As always, these exercises for proving reserves include some restrictions. The main qualification is that Binance is currently exclusively concentrating on BTC assets. There is currently no proof-of-reserves system if you own other cryptocurrencies.
Despite the fact that bitcoin remains the most widely used cryptocurrency, Binance provides thousands of various crypto assets. So let’s hope that this is only the beginning.
On November 22 at 23:59 UTC, Binance and Mazars both checked the Bitcoin reserves. Although it’s difficult to give a quick snapshot, Binance hasn’t set a deadline for its proof-of-reserves reports. The cryptocurrency exchange, for instance, might share data once per week or once per month.
Now that you are aware of everything, let’s discuss what is contained in the Mazars auditing report and Binance’s proof-of-reserves method. Binance creates a cryptographic seal by using a Merkle tree to include each individual user account. This Merkle tree includes user balances for the Spot, Funding, Margin, Futures, Earn, and Options products on Binance.
All of the wallets that contain customer assets are also listed by Binance. By just looking at the public addresses of cryptocurrency wallets, blockchain explorers allow you to view the balance of such wallets.
According to data from Binance, its users possessed 575,742.4228 BTC in total ($9.7 billion at the current exchange rate), and the company has enough BTC and wrapped BTC to cover 101% of these assets. It then got in touch with Mazars to let the accounting company independently confirm what the cryptocurrency exchange was stating.
Mazars asked Binance to execute a small transaction at a specified time to demonstrate that Binance was actually in control of the wallets. It employed a different technique for some wallets. In that instance, Mazars used Etherscan and BSCscan to confirm that Binance is the owner of the ETH and BSC wallets.
The scripts that Binance uses to obtain the total value from user accounts were examined by the auditing company. Using this SilverSixpence open source script, Mazars verified there were no duplicate user IDs and created its own Merkle tree.
Due to their use of the margin and loan service with other crypto assets as collateral, some users have negative Bitcoin balances. “Margin and loan products offered by Binance are always excessively collateralized and are subject to additional risk measures” (such as auto liquidation). As a note in the auditing report, Binance stated that these products “ONLY utilise funds from customers actively using Binance Earn products, such as savings, whose conditions authorise this.”
When all factors are considered, Mazars and Binance come to the same conclusion regarding BTC reserves. In terms of transparency, this is a good move. Let’s now hope that the upcoming weeks will bring about more announcements.
