When you put your crypto on an exchange, you’re trusting them to keep it safe. But how do you know they actually have it? That’s where proof of reserves, a method exchanges use to publicly verify they hold enough assets to cover all user balances. Also known as reserve audit, it’s the bare minimum check for any exchange claiming to be trustworthy. Without it, you’re just hoping they didn’t spend your Bitcoin to fund their office renovations—or worse, disappear overnight.
Proof of reserves isn’t magic. It’s math. Exchanges publish a list of wallet addresses holding customer funds, then sign a message proving they control those wallets. A third party checks that the total matches the sum of all user deposits. Simple. But most exchanges won’t do it. Why? Because if they can’t prove it, they might not have it. Look at the exchanges that failed in 2022 and 2023—FTX, Celsius, BlockFi—all skipped real proof of reserves. Meanwhile, platforms like LCX Exchange, a regulated crypto platform with transparent asset backing under Liechtenstein law and Sovryn, a Bitcoin-native exchange that avoids central custody entirely make transparency part of their design. You don’t need to take their word for it—you can check for yourself.
But proof of reserves alone isn’t enough. It only shows you have funds—it doesn’t prove those funds aren’t borrowed, pledged, or locked up elsewhere. That’s why some experts push for proof of liabilities, a matching audit that confirms all user claims are accounted for. Together, proof of reserves and proof of liabilities form a full solvency picture. Most exchanges won’t publish both. If they only show reserves, they’re hiding something. And if they don’t show either? You’re not a customer—you’re a bet.
What you’ll find in the posts below are real examples of what happens when exchanges skip transparency. From fake airdrops pretending to be legitimate to exchanges that vanish overnight, the pattern is clear: no proof of reserves means no trust. You’ll see how scams mimic real platforms, how regulators are starting to demand audits, and how even big names like dYdX still block users while claiming to be decentralized. This isn’t theory. It’s what’s happening right now. And if you’re holding crypto on an exchange that won’t prove it owns your coins—you’re already at risk.
Merkle Trees are the hidden engine behind blockchain trust. From Bitcoin to bank audits, they let you verify massive data with tiny proofs. Discover how they’re evolving to power stateless blockchains, AI-optimized systems, and quantum-safe infrastructure.
