Binance and Vitalik Buterin Will Work On a New Proof-Of-Reserve Method For Exchanges
Binance CEO Changpeng Zhao (CZ) said Binance would be working with Ethereum co-founder and head Vitalik Buterin during a recent AMA session. According to Chinese crypto blogger and journalist Colin Wu. Binance is also launching a recovery fund for powerful crypto companies experiencing a liquidity crunch.
Together they want to develop a whole new technique that should make it easier for cryptocurrency exchanges to provide evidence of reserves. Thus, they can prove that they have sufficient liquidity.
Following the scandal involving FTX lending its clients’ money to affiliated trading firm Alameda Research, CZ took the lead in this initiative and urged exchanges to tow the same path.
CZ vowed to implement Merkle trees on Binance to offer “full transparency” and urged all other cryptocurrency exchanges to do the same. The Merkle Tree algorithm is used by the Proof of Reserves protocol, which has been around for a while, to efficiently combine a large amount of data into a single hash.
However, this process can take some time. Binance revealed a snapshot of its hot and cold wallet addresses on Nov. 10. However, the world’s largest exchange by trading volume is still looking for new strategies to provide transparency regarding its holdings.
Details of the new project have not yet been released. However, this pilot platform will be the Binance exchange.
CZ Takes A Swipe At FTX
CZ earlier announced that Binance is in the process of setting up a recovery fund for the cryptocurrency industry. It will help cryptocurrency projects “that are strong” but have significant liquidity problems or are experiencing a liquidity crisis.
He advised projects that deem themselves worthy to approach Binance Labs. CZ also invited participants from the cryptocurrency space who had extra funds to join and co-invest in the sector.
Zhao replied that “liars or cheats are never considered as strong projects” when asked if FTX is a strong project fraught with a liquidity crisis. The $32 billion cryptocurrency exchange FTX crashed last week, shaking the cryptocurrency community.
The exchange’s assets were liquidated, and it filed for bankruptcy virtually overnight. The crash also affected Sam Bankman-Fried, the founder and former CEO of FTX, who might face jail time for mishandling client funds.
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