Cryptocurrency exchanges hold lots of digital money belonging to customers. However, some exchanges have gone bankrupt or been hacked, causing huge customer losses. While this happens to some, others like
this are thriving and proving they have more than enough funds.
How do this happen?This is where "proof of reserves" comes in. An exchange hires an independent auditor to check their wallets and make sure there's enough money to pay back all customers. The auditor provides cryptographic proof, which anyone can publicly verify.
ImportanceRegular audits and proof of reserves build trust by showing the exchange is being honest about having sufficient funds. It makes the exchange more accountable and transparent while it helps make crypto trading safer and more stable overall.
Also, Exchanges providing this proof like the one I stated above are fostering a more secure environment.
Do you think it should be a mandatory requirement for all exchanges to undergo regular third-party audits and provide publicly verifiable proof of their reserves?