As the world's leading digital asset trading platform, Gate.io has nine years of secure and stable operations, always putting the safety of users' assets first. The platform has officially announced it will commence another proof-of-reserves audit in July 2022. After completion of the audit, users will be provided with a method to verify their funds using an open-source, transparent, and cryptographically-verifiable Merkle tree.
As the first cryptocurrency exchange to provide 100% certified and user-verifiable proof-of-reserves, Gate.io has worked closely with Armanino LLP since 2020, a leading US audit firm, to successfully provide users with professional and credible asset verification services in an open-source, transparent, and cryptographically-verifiable Merkle tree. Gate.io patented this asset verification model in 2020. As a result, PoR audits using this model have become commonplace for exchanges to verify asset security, and Gate.io has set a standard for the industry in asset security verification.
What is Proof of Reserves?
In terms of a centralized exchange, all user asset balances are recorded in a centralized ledger database. The exchange's reserves are the total number of real user assets the exchange holds on the blockchain.
For exchanges that offer fiat trading, reserves can also include the amount of fiat currency an exchange holds. However, on Gate.io, fiat trading is performed in C2C transactions; the exchange does not store any of the users' fiat currency.
Proof-of-reserves is an auditing process by which an exchange proves that real assets back its users' balances. When reserves are proven, the total amount of the cryptocurrency held by the exchange is greater than or equal to the total number of user asset balances.
Why is it important to prove 100% collateral?
Assets held by a centralized exchange can't be monitored by the users themselves. In this sense, an exchange could misuse users' assets without their knowledge, which could lead to a situation where the reserves are lower than the recorded assets in the database.
As a result, users would face tremendous risks, such as delayed withdrawals. Worse yet, users could be unable to withdraw their assets due to insolvency. All these factors combined can diminish a user's sense of trust in an exchange.
Therefore, if the exchange wants to gain users' trust, it must prove that the real reserves are higher than the recorded user assets in a verifiable and transparent manner.
What is a Merkle Tree?
A Merkle tree
, or hash tree, is a cryptographic method of structuring data while retaining privacy and immutability. Merkle trees are commonly used in blockchain, most notably in Bitcoin blocks.
How Does Gate.io prove that it retains 100% collateral?
Gate.io enlists a certified and independent accounting firm, in this case, Armanino LLP, to conduct an audit. The independent firm will audit the financial data, assess its validity, and publish its findings. In addition, a written report will be publicly available.
Going further, the auditor generates a Merkle tree based on anonymized user balance data. A data fingerprint, known as a Merkle root, uniquely identifies all of the data. If any piece of the data were to be altered, the fingerprint wouldn't match, making tampering evident and detectable.
Then, the auditor compares the on-chain balances to the Merkle tree data and confirms that the user's balances are 100% backed by real assets. The Merkle root is then published alongside the auditor's findings in a public report. Furthermore, any user can independently verify the data through an open-source and public verification tool, which allows users to compare their balance data with the Merkle root.
In proving it retains 100% collateral, Gate.io ensures that it can meet the withdrawal requirements of all users at any time, without the risk of a run caused by a concentration of user withdrawals. Furthermore, any user can obtain verification information from the platform and verify that their assets are accurately recorded in the audit through the Merkle tree and verification program.
During a time of market fluctuations and uncertainty, Gate.io is commencing another proof-of-reserves audit, taking steps to enhance the security of its users' assets and improve confidence in the industry and market. Gate.io does not charge listing fees, only launches quality projects, and provides users with proof of assets and audit reports backed by certified auditors. The exchange aims to create a safe and transparent trading environment to help the health and stability of the digital asset market.
Since its establishment in 2013, Gate.io has been operating safely for nine years with zero incidents. Gate.io is committed to accelerating the promotion and application of global blockchain technology and building a more open, free and innovative economic and financial system for the world.
We appreciate your continued support and trust in the past nine years of Gate.io's growth!
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