From Multi-Scenario Challenges, Observing the Evolution of Proof of Reserves and Its Reform of the Crypto Financial System.

As the crypto world gradually moves towards the mainstream financial system, trust remains the foundation for building all value circulation mechanisms. However, with the expansion of the industry and the evolution of its architecture, core issues have gradually emerged: the structural contradiction between user asset custody and verifiability.

Whether it is cross-chain assets, stablecoins, or centralized exchanges, when users entrust their assets to intermediary institutions, questions regarding asset control, ownership of funds, and solvency become the threshold of trust. Proof of Reserves (PoR), as a mechanism that has been practiced and continuously evolved in multiple fields, is key to resolving this contradiction. It is far from a simple "showing funds" tool; it is a foundational solution that empowers the system with self-evident transparency, risk warning, and core capabilities for user protection. OKX, as a leading global exchange and on-chain technology company, is actively promoting the deepening and application of PoR technology.

Scenario 1: The Transformation of PoR from "Trust Intermediary" to "Verification Intermediary"

The birth of cross-chain assets was originally intended to solve the problem of fragmentation in the blockchain ecosystem, but its design inherently places users in a new trust model. Taking WBTC, one of the most liquid wrapped assets, as an example, it adopts a centralized custody model—users deliver Bitcoin to a custodian in exchange for wrapped assets on Ethereum. This process relies on BitGo's centralized custody and periodic reserve disclosures. In 2019, BitGo publicly released proof of assets, which included addresses on the BTC mainnet, Ethereum mainnet, and the total amount of BTC held in custody, proving to users whether BTC:WBTC has 100% reserve support.

However, this design also indicates that on-chain assets and native assets are not a 1:1 atomic exchange; users must trust that the intermediary will not make operational errors, will not lose private keys, and will not change custody addresses without disclosure.

Similar challenges exist in decentralized cross-chain protocols, such as Wormhole and LayerZero, which introduce multi-signature and validator networks in their design, publicly disclosing contract addresses and held funds to enhance resistance to manipulation and reduce the risk of malfeasance. However, even if the contract code is fully open-source, if the underlying asset reserves lack a verification mechanism and method, their security is still insufficient to support scaled financial activities.

The essence of this dilemma is the urgent need for transparency and verifiability after users relinquish control of their assets. Whether centralized or decentralized, only through a verifiable reserve proof mechanism can "trust intermediaries" be transformed into "verification intermediaries." The introduction of the OKX PoR mechanism is based on this goal, strengthening user confidence and providing a more certain verifiable structure. The self-verification tutorials and tools provided by OKX allow users to independently verify the accuracy and completeness of data, enabling them to confirm whether the custodian or controlling party's assets exist, match, and are retrievable.

To address the core pain points of cross-chain assets, every xBTC launched by OKX is backed by native BTC, and all key information can be publicly verified on-chain, ensuring full transparency. Users can verify the transparency of their assets in real-time through Proof of Reserves (PoR).

Scenario 2: The Evolution of PoR from "Quantity Proof" to "Quality Verification"

Reserve transparency and health have always been key focuses in the crypto industry. Ultimately, all crypto financial companies need to address whether they have sufficiently high-quality reserves, whether they are genuinely custodial, and whether they can provide instant redemption.

For example, Tether (USDT) is one of the most widely circulated stablecoins in the crypto market, emphasizing that each token is always worth 1 dollar. However, between 2017 and 2021, Tether faced scrutiny over its reserve structure, a controversy over the high proportion of commercial paper, and regulatory investigations, even leading to a brief de-pegging of USDT in 2022. In recent years, Tether has attempted to rebuild market trust by reducing exposure to commercial paper in favor of a higher proportion of cash and treasury assets, introducing third-party audits (from one of the top five independent public accounting firms, BDO), and increasing the frequency of asset reserve disclosures.

This indicates that sufficient redemption capability requires not only proof of adequate funding reserves but also verification of the quality of the asset composition. A series of events in the crypto industry has confirmed a consensus: reserve transparency, asset liquidity, and audit independence are all indispensable. The EU's Markets in Crypto-Assets Regulation (MiCA) also clearly states that stablecoin issuers need to regularly disclose the composition and management of their asset reserves and custody policies.

OKX has set a benchmark for transparency in this regard: as a platform that custodies mainstream stablecoins like USDT and USDC, OKX not only publishes the reserves and reserve ratios (>100%) of 22 assets monthly but also ensures that the structure of reserve assets is clear and healthy—BTC, ETH, USDT, and USDC account for 66% of the total, with the top ten assets covering 88.8%, avoiding excessive concentration in low-liquidity tokens. The health of the reserve structure is crucial for a financial company's risk resistance. Additionally, in terms of auditing, we will collaborate deeply with independent third-party auditing firm Hacken to conduct monthly audits, publicly disclosing the audit process and on-chain data.

Scenario 3: The Upgrade of PoR from "Asset Existence" to "Liability Constraint"

The collapse of FTX pushed the trust crisis of exchanges to its peak, profoundly revealing that asset existence does not equate to fund safety. The core issue with FTX was that the platform artificially inflated its solvency through off-balance-sheet debt or related transactions; even if reserves "exist," the "solvency" had long collapsed. Alameda Research used FTT tokens as collateral to obtain loans, creating a false impression of asset sufficiency, while user deposits were diverted for high-risk speculation.

Such events reflect that proof of reserves cannot stop at asset existence but must upgrade to asset-liability matching. It is necessary not only to prove that "the user's money is there" but also to prove that "the platform does not owe more money."

The evolution path of OKX PoR provides solutions for such systemic risks, evolving from Merkle Tree to the zk-STARK upgraded version: version 1.0 ensures that the platform possesses users' assets, while the zero-knowledge proof upgrade demonstrates that OKX can redeem user assets at any time (assets ≥ liabilities). Under the constraints of zero-knowledge proofs, users can ensure that their assets are included in the data computation and verification process, with no accounts overlooked and no user accounts showing negative balances. Such mathematical constraints can guarantee that exchanges will not misappropriate user funds or inflate debts.

This evolution is an essential path in the transparent evolution of the entire crypto financial system, providing a foundational trust structure with redemption guarantees for the crypto financial industry. Transitioning from periodic audits to mathematical constraints and on-chain consensus allows solvency to become a self-evident systemic attribute.

Conclusion

Although the three scenarios have different backgrounds, they reflect the gradually forming consensus in the industry: the security of user assets cannot rely on institutional self-commitment but must establish "trustless" infrastructure. From the transparency of reserves, the health of reserve structures, to further cryptographic self-evident capabilities, PoR builds the cornerstone of trust in every corner of the crypto financial world.

We believe that the significance of PoR lies in establishing a transparent, open, and self-verified asset-liability structure. It is not just a technology but the infrastructure for institutionalized trust.

Through technological innovation and institutional design, OKX has upgraded PoR from an "audit tool" to "trust infrastructure." Such practices are revealing the future direction of the industry: only by combining on-chain data, technological proofs, and systemic institutions can the entire industry truly achieve a leap in security.

Disclaimer:

This article is for reference only. It represents the author's views and does not reflect the position of OKX. This article does not intend to provide (i) investment advice or recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; (iii) financial, accounting, legal, or tax advice. We do not guarantee the accuracy, completeness, or usefulness of such information. Holding digital assets (including stablecoins and NFTs) involves high risks and may fluctuate significantly. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. Please consult your legal/tax/investment professionals regarding your specific circumstances. You are responsible for understanding and complying with applicable local laws and regulations.

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