July 20, 2020, 12:03PM EDT
• 8 min read

Exchange Proofs of Reserves & Solvency: a mechanical explanation

Quick Take

  • Proofs of reserves allow custodians to show the amount of funds they hold on-chain
  • Proofs of solvency allow custodians to show that the quantity of funds they hold on-chain exceeds their liabilities
  • Exchanges should conduct regular proofs of solvency to reduce the risk of systemic failures 
  • This is Part V in The Block Research’s Institutional Market Infrastructure Collection 

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