Cake DeFi joins trend, launches verified proof of reserves
Cake DeFi has published a Merkle-tree proof-of-its reserves to enable users to verify their assets deposited into the Singapore-based DeFi platform as well as its own holdings.
In view of recent concerns about the capitalization of crypto exchanges, Cake DeFi said that it now allows verification of the company’s wallet ownership and liabilities. It hopes the move would facilitate industry transparency and build a strong foundation of trust between crypto players and investors.
The new feature enables users to access their respective merkle trees to verify their funds. These merkle trees can be accessed through the personal hash IDs that Cake DeFi generates based on the user IDs on its database and by using SHA-1 Hash function. Users can use their code to check that their assets are recorded as liabilities in Cake’s reserves, as well as verify that assets are held in a 1:1 ratio.
Cake said it vowed to leverage the crypto winter and the redundancies seen in other firms could mean that the firm has access to a pool of top talent and new business opportunities.
“The possible implosion of FTX, once the second-largest exchange, has caused huge market turmoil in recent days. In light of the industry’s current liquidity struggles, it’s imperative for us to provide clarity on these challenges and reiterate how Cake DeFi’s business has always been transparent with its funds,” the company said.
In simple terms, Merkle trees are used to help users easily verify that their custodian has sufficient fiat and cryptocurrency reserves to back its customers’ balances.
Other than Cake DeFi, OKX, KuCoin, Crypto.come, Binance, Gate.io, Poloniex, Bitget, Huobi, Deribit, and Bybit are among those who pledged to publish their Merkle tree reserve certificates to increase transparency.
Proof of Reserve hit the headlines in recent weeks as many exchanges have taken steps to increase transparency and trust amongst their users. The collapse of Sam Bankman-Fried’s FTX, which filed for bankruptcy in November, has triggered withdrawal suspensions across associated platforms and beyond. To assure investors, major cryptocurrency exchanges have been publishing evidence of the reserves they hold.
While the crypto industry was looking to calm jittery investors, major professional auditors halted all work for crypto clients. Mazars Group, which had published a proof of reserves report for Binance and other big players, cut ties with clients in the digital assets space, dealing a major blow to an industry seeking to shore up confidence.