During the surface of the FTX liquidity crisis, two top-tier crypto exchanges disclosed their plan to offer Proof of Reserves, alternatively referred to as Proof of Funds (PoF), within December. 

Specifically, OKX reportedly revealed that “We’re hiring Armanino for auditing & will publish an auditable Merkle POF asap.” The firm then listed 23 BTC addresses and 13 Ethereum addresses carrying some of the exchange’s reserves.

In an earlier tweet, OKX reportedly claimed that the finalization for their PoF would be carried out “in the coming weeks (within 30 days)” the most recent update for this timeline has been changed to “asap.”

Current Head of Kucoin Johnny Lyu further issued an official announcement that Kucoin will be offering Proof of Reserves “in about one month”, with Kucoin to collaborate with “authoritative auditing institutions” to ensure that the Proof of Funds accurately represents the assets on hand.

“I’d like to express my sympathy for anyone who has been hurt by the current FTX situation. Hopefully, everything can be resolved quickly and the industry can get back on track.”

Proof of Reserves reportedly functions as a technique utilized by a few crypto exchanges to offer proof that they have sufficient assets to take care of every withdrawal. A reputable third-party auditor records all customer balances and conducts the conversion into a cryptographic Merkle Tree. 

This offers anonymity to the data as a means of protection for privacy, but it further enables users to compare the total balances held by customers with the total assets the exchange has on hand.

Similar protocols are used by Kraken, Bitmex, Gate.io, and different other exchanges, but are not used by FTX. CZ of Binance recently argued that all exchanges should provide PoFs to make sure that an exchange is not using “fractional reserves.”