Proof of Reserves (PoR): A Beginner’s Guide
Proof of Reserves is used to show whether a cryptocurrency platform holds users’ deposits in full with the corresponding assets, and enhances transparency through cryptographic verification.
What Problem Does PoR Solve?
Proof of Reserves (PoR) is used to prove that a platform holds sufficient funds to cover the assets it holds in custody on behalf of users at a 1:1 ratio. Ideally, the platform’s reserves should equal or exceed the total assets deposited by users, enabling users to determine whether their deposits are fully backed.
What Adequate Reserves Mean
Reserves must not only be sufficient in total value but also correspond to the types of assets deposited by users. For example, if a user deposits 1 BTC, the platform should increase its reserves by at least 1 BTC; it cannot substitute other currencies or corporate equity holdings. A platform that meets this standard may be described as having “full reserve backing.”
Verification Methods and Their Role
PoR audits use cryptographic methods to confirm whether user balances are included in the verification. The evidence mentions that platforms may use Merkle trees and zero-knowledge succinct non-interactive arguments of knowledge (zk-SNARK), or use third-party services to reduce the risk of result manipulation, but does not further explain the specific principles behind these technologies.
Understanding Its Role and Limitations
PoR is intended to improve the transparency and security of platforms’ asset custody and allow users to independently verify whether their account balances are included in the results. It also helps constrain platforms from lending out or investing user assets without authorization; however, this material primarily explains reserve coverage and does not comprehensively discuss all of a platform’s liabilities and operational risks.
Original Tutorial
https://www.binance.com/zh-CN/academy/glossary/proof-of-reserves-por
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