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According to reports, several cryptocurrency exchanges have recently indicated their intention to release so-called proof of reserves in a bid to allay market concerns. A major exchange recently published a list of its hot wallet and cold wallet cryptocurrency addresses, and several other major exchanges have committed to publishing Proof of Reserves, also known as Proof of Funds (PoF) . According to reports, PoF involves an exchange engaging a third-party auditor to register all client balances to the exchange and convert the balances into a cryptographic Merkle tree, which anonymizes the data. The exchange’s clients can then use the data from the Merkle tree to compare the total balances held by the clients with the total assets held by the exchange, to ensure that the exchange holds sufficient funds in cryptocurrency to fulfill customer withdrawal requests. According to reports, two separate cryptocurrency companies recently announced solutions to help exchanges facilitate and demonstrate PoF audits.

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