Binance’s bitcoin reserves are fully secured, according to auditing firm Mazars • TechCrunch
Audit firm Mazars has released a report on Binance’s BTC reserves. The audit firm has come to the same conclusion as Binance itself. From 22 November at At 23:59 UTC, Binance had enough bitcoins and bagged bitcoins to cover all users’ balances on the exchange.
Binance had already launched a proof-of-reserve website almost two weeks ago to reassure users after the collapse of FTX. Today’s audit only confirms that Binance does not appear to be lying, according to Mazars.
As always, there are some limitations with these proof-of-reserve exercises. The biggest caveat is that Binance is only focusing on BTC assets for now. If you have other cryptocurrencies, there is no proof-of-reserve system yet.
While bitcoin remains the most popular cryptocurrency, Binance offers hundreds of different cryptoassets. So let’s hope this is just a first step.
Similarly, both Binance and Mazars looked at BTC reserves on November 22nd at 23:59 UTC. While it’s difficult to provide a snapshot, Binance hasn’t committed to a timeline for its proof-of-reserve reports. For example, the crypto exchange may share data every week or every month.
Now that you’re aware of all that, let’s talk about what’s in Binance’s proof-of-reserve system and Mazar’s audit report. Binance uses a Merkle tree to include all individual user accounts and generate a cryptographic seal. This Merkle tree covers user balances across multiple Binance products – Spot, Funding, Margin, Futures, Earn and Options Wallet.
Binance also listed all the wallets containing customer funds. Blockchain explorers allow you to get the balance of crypto wallets just by looking at the public addresses of those wallets.
Binance found that users had a total of 575,742,4228 BTC ($9.7 billion at today’s exchange rate) and that they have enough BTC and wrapped BTC to cover 101% of those funds. They then contacted Mazars so that the audit firm could independently confirm the crypto exchange’s statement.
Mazars asked Binance to perform small transactions at a specific time to show that the wallets were indeed under the control of Binance. For some wallets, it used a different method. In that case, Mazars used Etherscan and BSCscan to check that the ETH and BSC wallets belong to Binance.
The audit firm checked the scripts that Binance uses to extract the total value in user accounts. Mazars checked that there was no duplication of user IDs and constructed its own Merkle tree using this open source script developed by SilverSixpence.
Some users have a negative BTC balance because they have used the margin and loan service with other crypto assets as collateral. “Binance’s margin and loan products are always oversubscribed and subject to additional risk controls (such as automatic liquidation). These products ONLY use funds from customers who actively use Binance Earn products as savings if terms allow this, Binance said as a comment in the audit report.
Taking everything into account, Mazars and Binance come to the same conclusion when it comes to BTC reserves. This is a good step in terms of transparency. Now let’s hope there are more announcements in the coming weeks.
