Mazars, an auditing firm, has published a report detailing Binance’s Bitcoin holdings. The auditing firm agrees with Binance’s assessment. By the end of trading on November 22 at 23:59 UTC, Binance had enough Bitcoin and Bitcoin Cash to pay off every user’s balance.
Nearly two weeks ago, after the demise of FTX, Binance launched a proof-of-reserves website to reassure its users. According to Mazars, Binance doesn’t seem to be lying, and the audit released today only confirms that.
There are, as always, caveats to these reserve proofs. The most important disclaimer is that at the present time Binance only supports Bitcoin-related assets. No proof-of-reserves system exists at present if you are a holder of alternative cryptocurrencies.
Binance provides access to hundreds of different crypto assets, including bitcoin, despite bitcoin’s continued dominance. So, let’s keep our fingers crossed that this is only the beginning.
Binance and Mazars both checked the BTC reserves on November 22 at 23:59 UTC. Binance has not promised a schedule for its proof-of-reserves reports, though it is difficult to provide an instantaneous snapshot. The cryptocurrency market could, for instance, compile and disseminate information on a weekly or monthly basis.
Now that you know this background information, we can discuss what’s in the Mazars auditing report and the Binance proof-of-reserves system. To generate a cryptographic seal that includes all Binance user accounts, the exchange employs a Merkle tree. Users’ funds in Binance’s Spot, Funding, Margin, Futures, Earn, and Options Wallets are reflected in this Merkle tree.
Binance also provided a complete inventory of all customer wallets. Using a blockchain explorer, you can check the value of cryptocurrency wallets by inputting the public addresses associated with those wallets.
There are currently 575,742.4228 BTC ($9.7 billion at today’s exchange rate) held by Binance users, and the exchange has enough BTC and wrapped BTC to cover 101% of these funds. It then reached out to Mazars to have the auditors double-check the cryptocurrency exchange’s claims.
Mazars requested that Binance conduct small transactions at a predetermined time to prove that Binance had control of the wallets. In the case of certain wallets, it resorted to an alternative approach. As such, Mazars used Etherscan and BSCscan to verify that the ETH and BSC wallets belonged to Binance.
An independent auditing firm verified Binance’s scripts for calculating the aggregate value of user accounts. Using this free and open-source script created by SilverSixpence, Mazars ensured that there were no duplicate user IDs and built its own Merkle tree.
Due to using the margin and loan service with collateral other than Bitcoin, some users have a negative BTC balance. Over-collateralization and additional risk controls are standard practice for all margin and loan products offered by Binance (such as auto liquidation). “These products use funds ONLY from customers actively using Binance Earn products like savings whose terms permit this,” Binance said in the auditing report.
When everything is taken into account, Mazars and Binance come to the same conclusion about BTC holdings. From a transparency standpoint, this is a positive development. Let’s keep our fingers crossed that there will be more news in the next few weeks.
Source: Techcrunch
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