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After breaking FTX, Bitso puts transparency into the game and bets on “Proof that Matters”

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Straight to the point: for Bitso, the current proof of reserves model doesn’t prove much (Image: Unsplash/Quantitatives)

THE Bitsoplatform cryptocurrenciespublished his views on the Proof of Reservations🇧🇷 Proof of Reservations is a mechanism that has been discussed among brokers so that they are more transparent, preventing a case similar to breach of FTX again.

As stated in the document published this Thursday (24th) on its blog, Bitso is working on proof that matterswhich goes beyond proving reserves, to seek to reassure its clients that their funds are safe.

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The company states that some of the proof of funds or proof of reserves are only a list of portfolios and, although it has become a practice across the market, it raises some concerns for two main reasons:

  1. It does not prove ownership of the keys needed to move coins from exchange wallets;
  2. There is no guarantee that the coins in these wallets will be enough to cover all of the exchange’s liabilities.

“To be solvent, assets must be greater than liabilities. In other words, being solvent means that, given current assets and liabilities, if customers were to withdraw 100% of their funds at the same time, they would be able to do so. As long as customers don’t know the number of liabilities, they have no way of knowing whether the company is solvent or not,” mentioned Bitso in its blog.

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Now, Bitso is asking customers to focus on the Proof that Matters, which for the company is the only relevant proof, as it shows that the total reserve balance is sufficient to cover the total liabilities (the total amount of deposits of customers).

“We are a global full-booking platform, which means we hold assets for every deposit our customers make and we don’t touch those funds without their explicit permission. We are working on several strategies to provide transparency to our clients, but some of these actions take time because we don’t want to do it quickly; we want to do it right,” added the company.

Five actions Bitso says it includes in its Proof that Matters:

  1. A Merkle Tree and a solvency report: a mechanism to validate customer balances. The company has committed to having this ready in less than a month.
  2. Third party audit: Bitso is looking for an external partner that will validate liabilities, assets and attest solvency.
  3. Market Working Group: Bitso contacted several reputable companies and renowned leaders in our industry to work together on building an industry standard.
  4. Zero Knowledge Proof (“ZK”): This cryptographic proof proves when something is true without revealing any customer information.
  5. Working with Regulators: As crypto continues to evolve, Bitso is committed to sharing industry best practices and creating policy frameworks that promote a more transparent, secure and accountable industry.

“The most incredible thing about crypto is the promise of a future that eliminates the need for a third party to guarantee trust. Our vision of the future is based on allowing anyone to prove that their funds are properly stored without having to resort to third parties. We look forward to having an industry standard that holds all participants fully accountable to their customers at all times. At Bitso, we are working tirelessly to make this happen.”

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Source: Moneytimes

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