Understanding the Functions and Limitations of Proof of Reserves

In the wake of the FTX Group’s fallout, centralized crypto custodians are facing pressure to shed light on their historically opaque balance sheets. This has sparked a renewed interest in Proof of Reserves (PoR) — the idea that custodians must be able to prove that they are indeed holding the assets that their clients have entrusted them with. Understanding the nuances that come with PoR assessments will be crucial to properly assess the risk of custodial crypto providers going forward.