As more exchanges and trading platforms commit to providing proof of reserves, overall transparency will improve. However, plenty of platforms still have to commit to this approach. Several of them are working on doing so, whereas others have yet to clarify their stance.
Today’s Proof of Reserves Landscape
The concept of introducing exchange proof of reserves continues to gain momentum. Custodial trading platforms need to illustrate their holdings and be more transparent. That has become even more important following the recent FTX debacle. Moreover, the collapse of that exchange has widespread consequences for numerous other centralized service providers.
With exchanges committing to making their reserves public, the important first step is taken. However, this new standard will take a while to become the norm. The number of platforms making their reserves public is relatively limited today. That will change soon, as numerous players confirmed they are working on proof of reserves. Putting everything together will take a while, but that is normal.
Glancing over the centralized exchanges, a fair few top-tier platforms would benefit from being more transparent. Coinbase is the obvious choice, as it is the second-largest CEX by normalized trading volume behind Binance. MEXC comes in third place and has confirmed they will commit to proof of reserves.
The stance of WhiteBIT and LBank, the fourth and fifth largest CEX by daily volume, remains unclear. Interestingly, Binance is the only platform in the top 6 that has reserve data available today. Zooming out further, three of the top 10 exchanges maintain proof of reserves today. Gate.io (7th) and OKX (10th) are the other entrants. DigiFinex, BKEX, and Coinsbit have yet to clarify their approach. Even so, all companies in the top 10 should pursue transparency.
What About Decentralized Exchanges?
It may prove trickier for decentralized exchanges to commit to the same standard CEXes will follow. More specifically, the smart contracts of DEXes are already known. However, these platforms do not hold user funds, and users deposit liquidity directly into the contract. As such, it wouldn’t make much sense for Uniswap or PancakeSwap to maintain proof of reserves.
That said, we may see some cooperation between CEXes and DEXes to push this new industry standard forward. There is an evident demand for more transparency and accountability. While some would expect more people to use decentralized exchanges, that has not happened yet. The leading DEX by normalized daily volume is Uniswap on Polygon, with $140.6 million in volume. That barely ranks it in the top 30.
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