A proof-of-reserves report published by Mazars reveals that Binance has enough assets to satisfy customer withdrawals. The auditor calulated Binance’s Merkle Root Hash, and provided customers a way to verify their asset balances on Binance.
Binance’s first proof of reserves (PoR) audit report shows that the business has adequate funds for mass client withdrawals and that consumers had put up enough margin to collateralize leveraged positions.
The South African division of the global audit, tax, and advising company Mazars carried out the PoR audit on November 22, 2022. It used a variety of techniques to confirm that Binance has sufficient resources to honor consumer withdrawals.
Binance Proof-of-Reserves Audit
First, an Asset Balance Report issued by Binance management was compared to asset balances from wallet addresses on the BNB Chain, Bitcoin, Ethereum, and Binance Smart Chain. The business discovered an asset variance of under 1%.
Mazars gave Binance management the order to transfer money from a certain wallet address to make sure they held the private key. The auditing company made sure that the addresses involved were identified as belonging to Binance when the transactions were validated on Etherscan and BSCScan.
Mazars then saw Binance’s management properly extracting customer liability reports using scripts created with internal proprietary code. These reports revealed client debt and receivables. Customers with negative balances were those who had borrowed money for leveraged trading. The firm then verified that the balances were correct.
The Merkle root hash of each client balance was then calculated by the auditor using a custom Merkle Tree generator. An auditor can use the Merkle root hash as a cryptographically secure fingerprint to confirm the asset balance of an exchange at a certain moment in time. The Merkle root permits verification but prevents unfiltered access to consumer data.
Customers of Binance can use the Merkle root hash on the Mazars website to locate their specific Merkle leaf and confirm that their balances were there on the exchange when the hash was calculated. Some people have reported having trouble using this.