The recent FTX debacle sent shockwaves through the crypto world, prompting top exchanges to take immediate action to enhance security and accountability. Among these measures, Proof of Reserve (PoR) and SaFu funds have emerged as popular strategies.
Proof of Reserve is now referred to as the Pillar of Transparency because it's a cryptographic technique that allows exchanges to demonstrate that they hold sufficient assets to cover their customer liabilities. By publishing a Merkle tree, a data structure that efficiently verifies the integrity of a large dataset, exchanges can prove that they have the necessary reserves to back their users' funds.
SaFu Funds also known as customer protection funds on the other hand is a Safety Net for Users cos it demands a pool of assets is set aside by exchanges to protect users funds in the event of a security breach or insolvency. These funds are typically held in a separate wallet and are not used for trading or other business operations.
I feel these two factors should be worth considering when choosing a good exchange cos while PoR provides a snapshot of an exchange's financial health at a specific point in time, SaFu funds offer a more comprehensive safety net that can protect users in a wider range of scenarios.
Few exchanges like Binance, OKX and particularly, Bitget who recently took this hybrid initiative by implementing both Proof of Reserve and a Users Protection Fund seems to have enjoyed some decent trading volume on their platform according to quarterly and annual report by token Insight and coingecko. This dual protection strategy may be the way forward to avoid the FTX-like debacle in the future and it also provides users with the assurance of knowing that their assets are backed by both cryptographic verification and a dedicated pool of funds.
As the crypto landscape is fast evolving and improving from setbacks everyday should we rely on these two security concept and say we are a bit safe to trade on few of these exchanges that are committed to users assets security?
Isn't this is pretty much the same question as
Could protection funds restore investors confidence back to CEX?I start to have the feeling that somebody is paying for these "questions"....