A ‘Proof of Reserves’ feature has been made available to customers after the company has recently passed an independent audit of its bitcoin holdings.
After the implementation of Kraken’s Proof of Reserves feature, clients can now independently verify that the bitcoin funds they hold on the cryptocurrency exchange are backed by genuine assets, allowing for a new level of transparency and accountability in the sector.
The feature is the result of an independent cryptographic audit of Kraken’s money conducted by accounting firm Armanino LLP, which used Merkle Trees to verify the amount of bitcoin held on behalf of its clients.
“In fact, our auditor confirmed Kraken controlled all of the bitcoin…belonging to clients on our exchange, as well as all of the bitcoin…held in our industry-leading on-chain and off-chain staking services,” according to a statement released on Thursday.
Users can use the independent Proof of Reserves website by Armanino to verify that Kraken owns the amount of bitcoin that the firm claims to possess on their behalf. However, customers must first visit Kraken’s website to obtain the appropriate information, including a unique account identification number, in order to access the records.
“Proof of Reserves,” according to Kraken’s website, is “an advanced cryptographic accounting system undertaken semi-annually by trusted auditors that allows you verify that Kraken is following stringent criteria for accountability and exceeding the transparency afforded by legacy financial firms.”
Proof of Reserves increases transparency by allowing clients to verify that the custodian of their bitcoin is trustworthy. The feature isn’t fully trustworthy; in fact, the user must still have faith in the third-party company that conducted the audit.
However, the idea is still positive because it stops cryptocurrency exchanges from using partial reserves, and it is also a better bargain than what traditional banks offer, which not only use partial reserves but also require full trust.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.