Crypto com will also make the reserves public after the fall of FTX

The fall of FTX will not only have negative consequences for the industry. In response to the drama at the fallen stock exchange platform, more and more parties are saying that they are starting with Proof-of-Reserves. Next in line to announce the adoption of Proof-of-Reserves is Kris Marszalek’s big Crypto.com.

What is Proof of Reserves?

The special thing about blockchain technology is that it creates the possibility for exchange platforms to prove to its users that they actually own all customer funds. So you can verify at Crypto.com in the future that they actually have your Bitcoin in their wallets. This way you can be sure that nothing can go wrong in that regard.

The problem with FTX was that they started gambling with customer credits, in order to pick up an extra return. That ultimately went completely wrong, leaving a big gap between the assets and the debts that the platform had to its users.

What exactly FTX did is not clear at the moment, but one of the rumors is that they invested in US stocks. They have also had a difficult period, so that they have in fact gambled the credits of customers. That is terrible for the reputation of the industry, but now a good development is emerging from that pain.

Crypto.com and Proof-of-Reserves

It seems only a matter of time before Crypto.com, like Binance and some other major exchange platforms, will start with Proof-of-Reserves. That is a good development, because it makes it practically impossible for stock exchange platforms to play with customers’ assets. That is good for confidence in the industry, but also for Bitcoin itself. If stock exchanges do not do this, fractional banking is possible.

Read Also:  Balaídos Stadium Renovation Targeted for 2027, World Cup Timeline a Factor

Fractional banking means that exchanges behave like banks and lend more Bitcoin than they actually have in cash. For example, if 1,000 people place 1 Bitcoin on an exchange platform, it may be attractive for that exchange to lend 100 Bitcoin without those customers knowing.

In principle, that goes well, as long as not all those 1,000 people withdraw their Bitcoin at the same time. That happened at FTX this week. You can best think of this as a digital bank run. Proof-of-Reserves theoretically puts an end to these practices. For example, exchanges can no longer create Bitcoin ‘out of the blue’ and earn money on the backs of customers.

Recent Articles

Related News

Leave A Reply

Please enter your comment!
Please enter your name here