Blockchain tech company Blockstream introduces an open-source tool, granting cryptocurrency exchanges a more efficient way to prove to auditors they have adequate liquidity
Called ‘Proof-of-Reserves’, the Blockstream tool lets exchanges demonstrate the number of bitcoins they can afford to spend, minus the need to prompt a ‘live’ transaction or go through the risks associated with the shifting of funds. It aims to improve transparency by creating proof of reserves for auditor verification, as stated on the company’s blog post.
Incipiently, the tool was tailored to outfit Blockstream’s own Liquid Network. But as developers continued to research the project, they found that current methods ‘for Bitcoin reserves’ used by various exchanges ‘had room for improvement.’ Furthermore, the software can potentially be applied on a broader scope, far and wide the bitcoin network, beyond Liquid.
Doubts on the Liquidity of Exchange Platforms Streaming the Crypto Sector
The most recent exchange questioned about its liquidity is QuadrigaCX. The Canadian exchange applied for creditor protection due to losing access to its digital wallet. Some critics challenge this, alleging QuadrigaCX does not have the funds which they claim are inaccessible.