Proof of reserves != proof of liabilities.
Proof today != proof tomorrow.
Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
11–20 of 506 posts
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#12>Both KuCoin and Crypto.com said they had provided customers with the ability to verify their own holdings individually online. How does this even work?
Looks like someone external does an audit(1), and then the auditor creates a Merkle tree which you can then validate (by a Markle leaf which you can access from your account).
Specifically for Crypto.com the auditors:
> obtained and inspected the scripts used by management to extract the Customer Liability Report from the database. Based on management’s explanation of the various parameters we ensured that the logic and the parameters are designed to extract a complete and accurate listing of client liability balances of the In-Scope Assets as at 00:00:00 UTC on 7 December 2022 while excluding any company internal accounts. It was found that the script was queried against the latest production data at the time of the data extract, which showed latest updated time as of 23:59:59 UTC on 6 December 2022. We observed management access the database and execute the scripts to extract the relevant data from the database. We subsequently obtained the data produced from management (i.e. the Customer Liability Report) and performed a row count and sum check on the data set. We did not identify any discrepancies based on the row count and sum check performed.
> Using the Mazars’ Silver Sixpence Merkle Tree Generating tool, we aggregated the client data obtained from management in this procedure and computed the Merkle Root Hash. The Hash for the Merkle Root based on the information supplied in procedure 6 is e535cf418ab603cc4b338069a814037d53 c50bf37dc5776631f3d9c3110e08af
So you do still have to trust the audit, and assume no foul-play, because I think this just shows that your balance was included in the audit (as a liability). I believe this just stops Binance from being able to hide customer liabilities from Mazars.
* (1) In Binance's case this wasn't actually an audit, and Mazars did this piece of work with Binance assuming good-faith according to processes mutually agreed between Mazars and Binance. As per the Mazars disclaimer, "This AUP engagement is not an assurance (financial audit) engagement. Accordingly, we do not express an opinion or an assurance conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported". I would note that IMO the Binance page does use the word "Auditor" a lot on the PoR page which might be slightly misleading (they are an auditor, but they aren't financially auditing Binance...?).
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#13> “We are financially OK,” said Zhao Where have we heard this before? Oh yeah: FTX is fine. Assets are fine.
There are no tanks in Baghdad.
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#14> “We are financially OK,” said Zhao Where have we heard this before? Oh yeah: FTX is fine. Assets are fine.
Interesting how the players change but the script is exactly the same and yet, people keep falling for it. I really don't get it. I once knew some people that were up to their necks in an MLM/pyramid scheme, it was like a cult, no matter how many examples you gave them of people ending up losing their shirts they would buy more of the crap and stuff it in every nook and cranny of their house being sure that they were…
I mean what else are they supposed to say?
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#15Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#16FTX was also audited by a top firm, Armanino!Changed nothing... In the article says: Following the collapse of FTX, Paul MacIntosh, EY’s US financial services crypto co-leader, said on LinkedIn that proof of reserves reports do not assess companies’ internal controls, “which ultimately was the downfall of FTX”.
There is a Big Four of auditing, and Armanino is certainly not one of them. I've never heard of them.
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#17What a misleading title > However, the accounting firm said on Friday that it had “paused its activity relating to the provision of proof of reserves reports for entities in the cryptocurrency sector due to concerns regarding the way these reports are understood by the public”. According to communications seen by the Financial Times, the level of media focus on the matter was also a factor in Mazars’ decision ... Maz…
Less money on the exchange means less money to be traded
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#18What a misleading title > However, the accounting firm said on Friday that it had “paused its activity relating to the provision of proof of reserves reports for entities in the cryptocurrency sector due to concerns regarding the way these reports are understood by the public”. According to communications seen by the Financial Times, the level of media focus on the matter was also a factor in Mazars’ decision ... Maz…
Outflows are good business only if you are fully backed....
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#19>Both KuCoin and Crypto.com said they had provided customers with the ability to verify their own holdings individually online. How does this even work?
I don't know what crypto.com or KuCoin did, but here are some cryptographic schemes for proof of solvency Vitalik wrote up post-ftx collapse: https://vitalik.ca/general/2022/11/19/proof_of_solvency.html
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#20FTX was also audited by a top firm, Armanino!Changed nothing... In the article says: Following the collapse of FTX, Paul MacIntosh, EY’s US financial services crypto co-leader, said on LinkedIn that proof of reserves reports do not assess companies’ internal controls, “which ultimately was the downfall of FTX”.
Exactly. And people act like this is a problem with cryptcurrency, but it's really a problem with people in corporations behaving badly.