What is Proof of Solvency? Why is this the Proof that Matters?

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Proof of Solvency is the result of having access to both the Proof of Reserves and the Proof of Liabilities with sufficient reliable mechanisms to validate that the total amount of assets held in custody is larger than the total amount of liabilities.

Solvency refers to an organization's capacity to cover total liabilities with current assets held. Proving an exchange is solvent is the only way to ensure that clients can dispose of their balance whenever they require to do so, even under a scenario in which all customers withdraw their funds at the same time. 

Therefore, providing access to transparent and trustworthy information to show that it is solvent to meet customer needs at all times is the only proof that matters.

Learn the differences between other sorts of Proofs here:

 

Bitso's roadmap to Proof of Solvency

Proving solvency is not a simple task and requires a couple of coordinated actions, such as:

  • Having a Merkle Tree with a liabilities report ready to be audited.
  • Auditing mechanisms and real-time reserves and liabilities verification.
  • Proof of ownership over the keys to the wallets where the funds are held.
  • Mechanisms to guarantee customer privacy while showing proof of reserves and liabilities.

Implementing these actions takes time because we don't want to do it fast; we want to do it right. You can learn more about what Bitso is doing to prove solvency here:


For informational purposes only, this is not investment advice. When buying, selling, trading or using cryptocurrencies you are subject to certain risks including price volatility and loss of capital, for more information please visit the following link.


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