Glossary
Proof of reserves
A published cryptographic or audited demonstration that an exchange holds the assets its customers have deposited.
After exchanges have collapsed holding less than they owed, "proof of reserves" became the phrase every venue uses. The common form is a Merkle tree: the exchange publishes a hash of all customer balances and a set of wallet addresses, and each customer can verify their own balance is included and that the wallets hold at least the total. It proves assets. It does not prove liabilities — an exchange could have borrowed the assets for the snapshot, or owe more elsewhere — and it is self-published.
Stronger forms exist. Kraken has an independent auditor attest its proof; Coinbase, as a listed company, files audited financial statements that cover the whole balance sheet rather than a snapshot. We rank those above a self-published tree, and a self-published tree above nothing at all, and the security sub-score reflects that hierarchy.
Of the eight exchanges we cover, seven publish some form of proof-of-reserves; Coinbase is the exception, and it is the exception for the better reason. The safety-scores page lines up who publishes what, and each exchange data sheet links to the source.
Where this shows up
- Kraken data sheet
- Coinbase data sheet
- Binance data sheet
- Exchange safety scores
- Kraken vs Binance: safety vs cost
Frequently asked questions
Does proof of reserves mean my funds are safe?
It means the exchange held at least what it showed at the moment of the snapshot. It says nothing about liabilities, governance or what happens under stress. It is a floor, not a guarantee.
Why does Coinbase not publish one?
Because it publishes something stronger: audited financial statements as a public company, which cover liabilities as well as assets.
Related terms and pages
Related terms
- Cold storage
Holding crypto in wallets whose private keys are never connected to the internet, so they cannot be reached by a remote attacker.
- Insurance fund
A pool of assets an exchange sets aside to cover losses — either customer losses after a security incident, or liquidation shortfalls on derivatives, depending on the fund.
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