What are proof-of-reserves audits, and how do they work?

Using methods like Merkle trees and zero-knowledge proofs, PoR provides transparency and security for users.

Proof-of-reserves (PoR) audits have become a vital tool in the cryptocurrency industry to promote transparency and security, especially in the wake of high-profile exchange collapses like FTX. 

While similar in concept to traditional banking capital adequacy requirements, PoR audits come with certain limitations, especially in their inability to verify liabilities and their reliance on periodic reports. 

This article explores PoR audits, their role in crypto and their evolution into more robust models for ensuring exchange solvency.

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