Some crypto leaders have argued that Binance’s “proof of reserve” is pointless. However, Binance CEO Changpeng “CZ” Zhao noted that the Merkle Tree-based proof of reserve is “healthy controls.” Binance CEO answered in a blog on Saturday how funds are managed at Binance to ensure full transparency and secure clients’ crypto holdings. Here are the details…
Binance CEO explains transparency in wallets
Binance CEO “CZ” answered community questions about how Binance manages funds and wallets in a November 26 blog post. It claims that Binance is committed to ensuring full legal and regulatory compliance and does not use client funds in its own accounts. Binance keeps customers’ crypto assets in separate accounts. These are completely different from the accounts Binance uses to hold crypto assets.
Transparency on Wallets at Binance | Binance Blog https://t.co/GOrjxW8RSn
— CZ 🔶 Binance (@cz_binance) November 25, 2022
Also, the crypto exchange uses the same wallet infrastructure to secure user assets as well as Binance’s crypto assets. Users’ deposits are moved to wallets, and Binance periodically moves these funds to a hot or cold wallet based on their transaction amount. It helps to minimize the number of transactions and keep gas fees to a minimum. Ultimately, it passes these savings on to customers, keeping transaction fees the lowest in the industry.
Cold wallets stand out in large withdrawal transactions
Binance maintains a balance in hot wallets to manage deposits and withdrawals. However, large deposits and withdrawals are managed through cold wallets. Additionally, each customer has a unique identifier (UID) and associated login credentials. This helps separate clients’ crypto holdings from Binance’s holdings.
Additionally, Binance has begun work on dedicated on-chain client crypto-asset wallets to comply with the MiCA Regulation. It also uses its own wallet infrastructure to secure clients’ assets.
Building a self-sufficient ecosystem has protected Binance customers from exposure to the contagion we see in the crashes of other industry players like Celsius, Voyager and now FTX.
Is the Merkle tree proof of reserve the best method?
cryptocoin.com As we reported earlier, Kraken CEO Jesse Powell described Binance’s proof of reserve as “nonsense”. Because exchanges cannot include debts in this proof of reserve without auditing. However, Binance CEO believes that Merkle Tree-based proof of reserve is the best way to validate crypto holdings. He responded to Jesse Powell’s allegations by announcing that third-party auditors would be included in Binance’s proof of reserve. Zhao used the following statements:
I’ve said many times in public that the congestion was due to the auditors’ waiting a few weeks. We are progressing step by step.
https://twitter.com/cz_binance/status/159639158380700673
Binance Coin is on the rise
Close to Zhao’s statements, the exchange’s BNB coin rose. After Binance closed its SAFU fund with $1 billion, BNB reacted with a solid 11 percent growth in a matter of hours. Unfortunately, the enthusiasm did not last as long as the market wished. The 200-day moving average, which often acts as a strong barrier for assets, has taken a hit again. It caused the rally of Binance token to slow down. The cryptocurrency has been consolidating around the level for the past two days.
However, a positive outcome is still possible given the mostly positive mood about BNB and Binance’s business in general, as opposed to FTX’s collapse due to a lack of proper risk and fund management, according to experts. Binance is trying to solidify the SAFU fund’s ability to absorb almost any market fluctuation. This practically increases the resilience of the ecosystem as a whole and makes BNB more attractive to an investor. Unfortunately, the current state of the cryptocurrency market is the only factor keeping BNB from rallying.
