Exchange research

Proof of Reserves Explained: What It Can and Cannot Show

Proof of reserves can provide useful custody information, but it is not automatically a full balance sheet or a guarantee.

What it can show

A proof of reserves may document certain assets attributed to an entity at a specific point in time, using a stated verification or audit methodology.

What may be missing

On-chain reserves alone do not necessarily describe all liabilities, debts or operational risks of a business.

What to check

Look at the date, verifier, methodology, included assets, exclusions and whether the figures can be reconciled.

How to use it

Treat it as one input alongside corporate structure, licensing, security, custody and transparency.

FAQ

Does proof of reserves mean funds are guaranteed?

No. It is a partial disclosure under a defined methodology and does not replace an assessment of liabilities and risk.

Why does the date matter?

Because a reserves snapshot describes conditions at a particular time and those conditions can change.

Source

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