Proof of Reserves (PoR) Explained: What to Check Before Trusting an Exchange
PoR is not a magic shield, but it’s a meaningful transparency signal. Learn how PoR works, its limits, and what a trader should verify in 5 minutes.
After FTX, traders stopped believing “trust us.” Proof of Reserves (PoR) became the new baseline.
But PoR is frequently misunderstood. A PoR badge does not guarantee safety—but it can be a useful filter if you know what to look for.
What is Proof of Reserves?
At a high level, PoR attempts to show:
- the exchange holds on-chain reserves
- those reserves are sufficient relative to customer balances
Some exchanges publish:
- on-chain wallet addresses (reserve side)
- a Merkle tree or similar method to let users verify inclusion (liability side)
The 3 questions PoR should answer
- Do they publish reserve addresses?
- Do they publish liabilities (or user inclusion checks)?
- How often is it updated?
If an exchange only publishes a reserve snapshot without liabilities, it’s incomplete.
The limits (and how to interpret them)
PoR can still miss:
- off-chain liabilities (loans, obligations)
- operational risks (withdrawal freezes, governance, regulatory actions)
- reserve quality (are assets liquid or junk?)
Use PoR as a signal, not a guarantee.
A 5-minute PoR checklist
When reviewing an exchange, verify:
- Update cadence: monthly/weekly is better than “one-time”
- Asset composition: mostly liquid assets (BTC/ETH/USDT) vs obscure tokens
- Third-party attestations: independent verification is better than self-reported
- Transparency: public communication when incidents happen
Where to go next
If you want to compare exchanges using trust signals, use the rankings + trust score:
If you want a widely used venue with strong liquidity (useful for tight spreads):
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Why trust this author?
Emily spent 6 years as a compliance officer at a major Wall Street investment bank before joining CryptoFeeDiscount. She ensures all our content meets regulatory standards and fact-checks every claim. Her institutional background brings rigorous accuracy to our reviews.