Cake DeFi publishes Merkle tree-based Proof of Reserves

Singapore-based decentralized finance (DeFi) providers agency, Cake DeFi, has introduced the discharge of its Proof of Reserves utilizing the cryptographically-audited Merkle tree technique. 

Developed by Ralph Merkle in 1979, the Merkle tree technique is a method of proving {that a} sure piece of knowledge is included in a set of knowledge, with out revealing the complete set of knowledge. Under the proof of reserves technique, a Merkle tree is used to show {that a} cryptocurrency alternate has the reserves it claims to have, with out revealing the precise quantities of every cryptocurrency that it holds, to be able to defend the privateness of the platform and its customers.

According to the DeFi providers agency, customers can now confirm their belongings, in addition to the corporate’s liabilities, in a newly rolled-out characteristic that grants public entry to its Merkle tree Proof of Reserves, accessible on its web site. The instrument intends to allow customers to carry out a self-audit of their very own funds below the Merkle tree knowledge construction. 

In the spirit of transparency, Cake DeFi mentioned it’ll additionally allow customers to see how yields are generated, with real-time on-chain knowledge about buyer funds.

Related: Cake DeFi launches $100M enterprise arm for Web3, gaming, and fintech initiatives

Although many exchanges comparable to Binance, Crypto.com, Bybit, and OKX, have all rolled out Merkle Tree-based proof of reserves to advertise transparency following the collapse of FTX, some officers stay skeptical concerning the efficacy of the Merkle tree-based proof of reserves. 

In a Dec. 22 interview with The Wall Street Journal, the SEC’s performing chief accountant, Paul Munter, shared that the outcomes of these audits aren’t essentially an indicator that the corporate is in an excellent monetary place. According to him, proof-of-reserves studies by exchanges “lack” ample data for stakeholders to find out whether or not the corporate has sufficient belongings to satisfy its liabilities.