Crypto: Breaking Why Proof-of-reserves Alone Doesn’t Build Real Trust

At its core, proof-of-reserves is a public demonstration that a custodian holds the assets it claims to hold on behalf of users, typically using cryptographic methods and onchain transparency.

If every crypto exchange can publish a proof-of-reserves (PoR) report, why can withdrawals still be delayed or halted during a crisis?

The truth is that proof-of-reserves is not a trust guarantee. It shows whether verifiable assets exist on a platform at a single point in time, but it does not confirm that the platform is solvent, liquid or governed by controls that prevent hidden risk.

But even when executed properly, PoR is often a point-in-time snapshot that can miss what happened before and after the reporting moment.

Without a credible view of liabilities, PoR cannot prove solvency, which is what users actually need during periods of withdrawal stress.

Did you know? On Dec. 31, 2025, Binance’s CEO wrote that the platform’s user asset balances publicly verified through proof-of-reserves had reached $162.8 billion.

In practice, PoR involves two checks: assets and, ideally, liabilities.

On the asset side, an exchange shows that it controls certain wallets, usually by publishing addresses or signing messages.

Liabilities are trickier. Most exchanges take a snapshot of user balances and commit it to a Merkle tree, often a Merkle-sum tree. Users can then confirm that their balance is included using an inclusion proof, without everyone’s balances being made public.

When done properly, PoR shows whether onchain assets cover customer balances at a specific moment.

Source: CoinTelegraph