What is proof of reserves?

Proof of reserves (PoR) refers to methods intended to verify the assets a crypto service provider, such as a centralized exchange, discloses at a particular date. Address balances, control over assets and, in some implementations, customer liabilities are relevant inputs. Not every PoR exercise covers the same information.

What does a reserve ratio leave unanswered?

Seeing assets does not establish every liability or claim against them. Undisclosed obligations, borrowed assets or excluded accounts can change the interpretation of a seemingly reassuring ratio.

The PCAOB investor advisory distinguishes PoR reports from financial-statement audits. Balances can change after the report date; the document does not guarantee that withdrawals will always be possible.

Example

A hypothetical platform discloses 100 BTC of reserves and 95 BTC of customer liabilities. For those inputs alone, 100 / 95 × 100 is approximately 105.26%. If another 15 BTC of liabilities was excluded, the same assets cover total liabilities of 110 BTC at approximately 90.91%.

The calculation shows why the initial ratio above 100% is not enough; it is not a real exchange's balance sheet. When assessing an exchange, read the report date and liability coverage alongside the ratio.

Is a Merkle proof the same as a company audit?

As illustrated by Binance's methodology explanation, some systems let customers verify cryptographically that their balance is included in the disclosed liability set. Inclusion of your record does not establish that every company obligation has been disclosed. Reserve verification is one component of a broader financial and security assessment.

Our comparison of eight crypto exchanges places reserve disclosures alongside fees, access and withdrawal conditions. It separates the volume ranking from the assessment of safety.