Binance's first proof-of-reserve (PoR) audit report reveals that the company has sufficient assets for bulk withdrawals and that customers have placed sufficient margin to secure leveraged positions.

The PoR audit was conducted on 22 November 2022 by the South African business unit of international auditing, tax and consulting firm Mazars. He used various methods to verify that Binance had enough assets to handle customers' withdrawals.

Binance Merkle Tree Audit

Initially, the audit firm independently matched asset balances at wallet addresses on BNB Chain, Bitcoin, Ethereum, and Binance Smart Chain with an Asset Balance Report provided by Binance management. The company found less than 1% variance in assets.

Mazars has instructed Binance management to move funds from a specific wallet address to ensure they have the private key. Transactions were verified on Etherscan and BSCScan, where the audit firm made sure that the addresses in question were marked as owned by Binance.

Mazars then observed Binance management using custom internal code scripts to properly extract customer liability reports. These reports showed money owed and credited from customers. Customers who borrowed for leveraged trading had a negative balance in the report. The firm later confirmed that the balances were correct.

The auditor then used a proprietary Merkle Tree generator to calculate the Merkle root hash of all customer balances. The Merkle root hash is a cryptographically secure fingerprint that an auditor can use to verify an exchange's asset balance in a snapshot. Merkle root allows verification while preventing direct access to customer information.

Binance customers can enter the Merkle root hash on Mazars' website to find the unique Merkle leaf to verify that their balance exists on the exchange during hash calculation. Some users stated that they had difficulty doing this.

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