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Why Proof-of-Reserves Snapshots Fall Short of Demonstrating True Exchange Solvency
Proof-of-reserves shows that a custodian controlled specific onchain assets at a single moment, but it does not by itself confirm solvency, liquidity or the quality of internal controls. An exchange can "pass" PoR while still carrying hidden liabilities, using encumbered assets or facing liquidity gaps, and many PoR exercises resemble limited agreed-upon procedures rather than full audits. A more reliable trust framework combines PoR with comprehensive liability proofs, governance and control assessments, and clearer disclosures around liquidity and encumbrances.