On Tuesday, amid numerous conversations regarding the crypto exchange’s reserve test, Kraken executive Jesse Powell shared a screenshot of coinmarketcap.com’s recently launched reserve test (POR) dashboard. Powell said he wanted to be “more assertive about reporting issues” and stressed that a POR audit “requires cryptographic proof of client balances and wallet control.”
Jesse Powell points out that “proof of reserves audit requires cryptographic proof of client balances and wallet check”
Kraken’s Jesse Powell had a lot to say about FTX’s recent crash, as the exchange executive recently said the trading platform’s fallout was “a massive setback.” Powell has also been speaking on the subject of Reserve Test (POR) of late as Kraken has been a member of Nic Carter’s Reserve Test or “Wall of Fame” list for quite some time. Kraken is known to have “Full POR” and is described as “Merkle point-in-time auditor assisted user validation.”
Just recently, cryptocurrency price aggregation website coinmarketcap.com (CMC) announced the launch of a reserve test dashboard and Binance CEO Changpeng Zhao (CZ) tweeted on the CMC POR dashboard. “@Coinmarketcap has released a new exchange reserve dashboard feature,” CZ said on Nov. 22. That same day, Kraken executive Jesse Powell tweeted about the new CMC feature.
“I said I would be more assertive about reporting the problems. This is one of them,” Powell She said. “’Reserves’ = assets minus liabilities. ‘Reserves’ != portfolio list,” explained Kraken executive Powell added:
The AUDIT Proof of Reserves requires cryptographic proof of client balances and wallet control. #Proofofreserves audit must have: 1. sum of client liabilities (auditor must exclude negative balances). 2. user-verifiable cryptographic proof that each bill was included in the sum. 3. signatures proving that the custodian is in control of the wallets.
The paper shows that full POR is easily achievable, but will the heads of cryptocurrency exchanges deliver on their Merkle-proof audit promises?
The POR topic comes at a time when the crypto community is nervous and exchanges have promised to share POR audits with proof of Merkle. A handful of exchanges have shared address lists, and analytics firm Nansen has also released a dashboard of exchange portfolios. When Powell shared her sentiment about him on Twitter, she also shared an archive.org link to a document titled “Proving Your Bitcoin Reserves.”
The paper discusses how flat lists of accounts/balances can be achieved, the Merkle approach to Proof of Liabilities and “Proof of Assets”. “Proving control of resources” is the “intuitive and straightforward solution is to sign a declaration of ownership with all relevant private keys,” the document explains.
While the paper and Jesse Powell explain that the full POR is easily obtained via The Merkle approach and by proving ownership of private keys, a number of exchange heads have promised to share not only cold and hot wallet addresses, but also audits based on the Merkle approach. The only thing left is that the crypto community remembers such promises and keeps the CEOs of the exchange on them.
What do you think of Jesse Powell of the Kraken getting more assertive about things like the stock test? Let us know what you think about this topic in the comments section below.
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