Proof of Reserves

Proof of reserves (PoR) is an exchange's attempt to show it holds enough assets to cover customer balances. After FTX and other collapses, major venues adopted cryptographic attestations — often Merkle trees that let each user verify their balance is included in a published liability total without revealing everyone else's holdings.

A Merkle tree lets the exchange publish one root hash representing all customer balances. You receive a proof path showing your account is in the tree and that the exchange did not omit liabilities from the published total. Negative balances, internal wash accounts, and off-balance-sheet debt are ways PoR can pass while insolvency remains hidden.

What PoR does not prove: that assets are not pledged elsewhere, that stablecoins are fully backed, or that the exchange will honor withdrawals tomorrow. It is a point-in-time snapshot, often weeks stale by publication. Treat PoR as one signal among many — alongside regulatory licensing, audit history, and whether the venue survived prior market stress without pausing withdrawals.