Proof of Reserves (PoR)

Proof of Reserves (PoR) is an auditing practice where a cryptocurrency exchange or custodian provides cryptographic evidence that it holds sufficient assets to cover all customer deposits. Typically implemented using Merkle tree proofs, PoR allows users to verify that their specific balance is included in the total without revealing other customers' data. The practice gained urgency after the collapse of FTX in 2022, which revealed massive shortfalls between customer deposits and actual reserves.