OKX Security Special Issue | PoR: Unlocking the Three Steps of Trust: “Verifiability, Health, and Sufficient Payment”

As the crypto world gradually moves towards the mainstream financial system, trust remains the foundation for building all value circulation mechanisms. As the industry expands and the architecture evolves, the core problem gradually becomes prominent: the structural contradiction between user asset custody and verifiability.

Whether it is cross-chain assets, stablecoins, centralized exchanges, etc., when users deliver assets to intermediaries, questions about asset control, fund ownership, and solvency become the threshold of trust. Proof of Reserves (PoR), as a mechanism that has been practiced in many fields and continues to evolve, is the key to solving this contradiction. It is far from a simple "show funds" tool, but also a cornerstone solution that gives the system the core capabilities of self-transparency, risk warning and user protection. As a global leading exchange and on-chain technology company, OKX is actively promoting the deepening and application of PoR technology.

Scenario 1: PoR transforms from “trust intermediary” to “verification intermediary”

The birth of cross-chain assets was originally to solveBlockchainThe problem of ecological fragmentation, but its design naturally puts users in a new trust model. Take WBTC, one of the most liquid BTC wrapped assets, as an example. It adopts a centralized custody model - users deliver Bitcoin to the custodian in exchange for wrapped assets on Ethereum. This process relies on BitGo's centralized custody and regular reserve disclosure. In 2019, BitGo disclosedproof of assets,The proof includes the addresses of the BTC mainnet, Ethereum mainnet and the total number of custodial BTC, proving to users whether BTC:WBTC has 100% reserve support.

But at the same time, this design also shows that there is no 1:1 atomic swap between on-chain assets and native assets. Users must trust that the intermediary will not make mistakes, lose private keys, or change the custody address without disclosure.

Similar challenges also exist in decentralized cross-chain protocols. For example, Wormhole and LayerZero introduce multi-signature and validator networks in their designs, disclose contract addresses and funds held, improve anti-manipulation capabilities, and reduce the risk of malicious behavior. However, even if the contract code is completely open source, if the underlying asset reserves lack verification mechanisms and methods, itsSafetyThe financial system is still not strong enough to support large-scale financial activities.

The essence of this dilemma is the urgent need for transparency and verifiability after users transfer control of their assets. Whether it is a centralized or decentralized solution, only through a verifiable reserve proof mechanism can the "trust intermediary" be transformed into a "verification intermediary". The introduction of the OKX PoR mechanism is based on this goal, strengthening user confidence and providing a more deterministic verifiable structure. The self-verification tutorials and tools provided by OKX allow users to independently verify the accuracy and completeness of data. It allows the fund custodian or controller to no longer rely solely on brand trust, but can be independently verified by users whether their custodial assets exist, match, and are retrievable.

In order to address the core pain points of cross-chain assets, each xBTC launched by OKX is backed by native BTC, and all key information can be publicly verified on the chain to ensure full transparency. Users can verify the transparency of their assets in real time through proof of reserves (PoR).

Scenario 2: PoR evolves from “proof of quantity” to “proof of quality”

The transparency and health of reserves have always been the focus of the crypto industry. All crypto financial companies, in the final analysis, need to solve the problem of whether there are enough high-quality reserves, whether they are truly custodial, and whether they can be redeemed immediately.

For example, Tether (USDT) is one of the most widely circulated stablecoins in the crypto market, which emphasizes that each token is always worth $1. However, during the period of 2017-2021, Tether experienced doubts about its reserve structure, controversy over the excessive proportion of commercial paper, and regulatory investigations, which even led to a brief depegging of USDT in 2022. In recent years, Tether has tried to rebuild market trust by removing its exposure to commercial paper and shifting to a higher proportion of cash and treasury assets, introducing third-party audits (BDO, one of the top five independent public accounting firms in the world), and increasing the frequency of disclosure of asset reserves.

This shows that sufficient repayment capacity not only requires proof of sufficient capital reserves, but also requires verification of the quality of asset composition. A series of events in the crypto industry have confirmed a consensus: reserve transparency, asset liquidity and audit independence are indispensable. The EU's "Crypto Asset Market Regulation Act" Mica also clarifies that stablecoin issuers need to regularly disclose the composition and management of asset reserves, custody policies, etc.

OKX has set a benchmark for transparency in this regard: as a platform that hosts mainstream stablecoins such as USDT and USDC, OKX not only publishes the reserves and reserve ratios of 22 assets (>100%) every month, but also ensures that the reserve asset structure is clear and healthy - the four core assets of BTC, ETH, USDT, and USDC account for 66%, and the top ten assets cover 88.8%, avoiding excessive concentration on low-liquidity tokens. The health of the reserve structure is very important for a financial company's risk resistance. In addition, in terms of auditing, we will also work closely with the independent third-party auditing agency Hacken to conduct regular monthly audits and disclose the audit process and on-chain data.

Scenario 3: PoR upgrade from “asset existence” to “liability constraint”

FTX的崩塌将交易所的信任危机推向顶点，深刻揭示了资产存在不等于资金安全。FTX的核心问题是：平台通过表外债务或关联交易虚增偿付能力，即使储备“存在”，但“偿付能力”早已崩塌。Alameda Research以FTT代币为抵押品获取贷款，制造出资产充足的假象，而用户存款却被挪用于高风险投机。

Such incidents reflect that proof of reserves cannot stop at the existence of assets, but must be upgraded to asset-liability matching. That is, it is necessary not only to prove that "the user's money is there", but also to prove that "the platform does not owe more money".

The OKX PoR evolution path provides a solution to this type of systemic risk, evolving from Merkle Tree to the zk-STARK upgrade version: Version 1.0 ensures that the platform owns the user's assets, and the upgrade of zero-knowledge proof proves that OKX can redeem user assets at any time (assets ≥ liabilities). Under the constraints of zero-knowledge proof, users can ensure that their assets are included in the calculation and verification of data, no accounts are omitted, and there are no negative balances in user accounts. Such mathematical constraints can ensure that the exchange will not have problems such as misappropriation of user funds and inflated debts.

This evolution is the only way for the entire crypto-financial system to evolve towards transparency, providing the crypto-financial industry with an underlying trust structure that guarantees repayment. The transition from periodic audits to mathematical constraints and on-chain consensus makes solvency a self-provable system attribute.

Conclusion

Although the above three scenarios have different backgrounds, they all reflect the gradual formation of industry consensus: the security of user assets cannot rely on institutional self-commitment, but requires the establishment of a "trustless" infrastructure. From the transparency of reserves, the health of the reserve structure to further cryptographic self-certification capabilities, PoR builds a cornerstone of trust in every corner of the crypto-financial world.

We believe that the significance of PoR is to establish a transparent, open, and self-verified asset-liability structure. It is not just a technology, but an infrastructure for institutionalized trust.

OKX has upgraded PoR from an "audit tool" to a "trust infrastructure" through technological innovation and system design. Such practices are revealing the future direction of the industry: only by combining on-chain data, technical proofs and system systems can the entire industry truly achieve a leap in security.

Disclaimer:

This article is for reference only. This article only represents the author's views and does not represent the position of OKX. This article is not intended to provide (i) investment advice or investment recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; (iii) financial, accounting, legal or tax advice. We do not guarantee the accuracy, completeness or usefulness of such information. Holding digital assets (including stablecoins and NFTs) involves high risks and may fluctuate significantly. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. Please consult your legal/tax/investment professionals for your specific situation. Please be responsible for understanding and complying with local applicable laws and regulations.

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