Bybit joins trend, releases Merkle Tree-verified proof of reserves
The cryptocurrency exchange Bybit joins the parade of exchanges in the industry pushing for transparency post the FTX catastrophe.
On Dec. 12, it announced that it has launched a Merkle Tree-based proof of reserve system. The new transparency initiative allows its users to directly verify Bybit’s holdings, along with their personal assets deposited into the exchange.
The feature is available to all users with funds in both trading accounts and funding accounts, which also includes crypto holdings in Bybit Earn products.
Additionally the new feature enables verification of Bybit’s wallet ownership, that assets are held with a 1:1 ratio.
Ben Zhou, the co-founder and CEO of Bybit commented on the usage of Merkle Trees in liquidity verification:
"The cryptographic solution brings forth a crypto-native, trustless model of providing verifiable evidence of our on-chain holdings and liabilities…"According to the announcement, the exchange is also enhancing withdrawals and upping its risk management controls. It also committed to publishing all of the content of its Bitcoin (BTC) and Ethereum (ETH) wallets.
It already released its reserve wallet addresses on Nov. 16, the week after the FTX scandal began to unravel.
Related: Crypto.com releases proof of reserves, showing above 100% for BTC, ETH
As users pivot their attention to keeping their funds safe and exchanges accountable, many of the industry’s largest players have come out with similar transparency strategies.
Binance was the first to offer up its reserves for public viewing and pledge for a Merkle Tree-based system, which it then released two weeks later.
Though after it released some of its otherwise internal data, red flags were exposed in the exchange’s finances such as its corporate structure, BTC liabilities and internal control quality.
Two other exchanges, Huobi and Gate.io, also came under scrutiny after sharing snapshots of their reserves using loaned funds. Whereas Greyscale says it is hesitant to release anything due to security issues.
Jesse Powell, the co-founder and CEO of Kraken, came out with a statement saying that all of these proof of reserve efforts mean nothing without sum of client liabilities.