A "Proof of Reserves Audit Requires Cryptographic Proof of Client Balances and Wallet Control," as Jesse Powell emphasizes, is necessary.
Kraken’s Jesse Powell, an official at the exchange, has a lot to say about the recent fall of the FTX, and he recently described the repercussions from the trading platform's failure as "a tremendous setback." Powell has also been discussing the topic of proof-of-reserves (POR) as of late, seeing as how Kraken has been a part of Nic Carter's proof-of-reserves list or "Wall of Fame" for a considerable amount of time. It is said that Kraken has "Full POR," and it is explained that it is a "auditor-assisted, user validation using Merkle method, point in time" system.

Coinmarketcap.com (CMC), a website that aggregates cryptocurrency prices, had recently announced the creation of a proof-of-reserves dashboard. Binance CEO Changpeng Zhao (CZ) tweeted about the CMC POR dashboard. CZ announced on November 22 that a new exchange reserve dashboard tool had been introduced by @Coinmarketcap. On the same day, Kraken executive Jesse Powell sent a tweet announcing the newly implemented CMC function.

"I promised that I would be more direct in pointing out flaws, and I have been working on that. Powell said that this was one of those instances. "'Reserves' Equals assets minus liabilities. The CEO for Kraken clarified that "Reserves" is not synonymous with "list of wallets." Powell added:

The Documentary Evidence of Reserves AUDIT necessitates the use of cryptographic evidence to verify client balances and management of wallets. # An audit of the proof-of-reserves must contain the following: 1. the total client liabilities (auditor must exclude negative balances). 2. a user-verifiable kind of cryptographic evidence demonstrating that each account was factored into the total. 3. signatures that demonstrate the custodian's authority over the wallets in question.

The paper demonstrates that full POR may be easily achieved, but the question is whether or if the leaders of cryptocurrency exchanges will keep their promises to conduct tamper-proof audits.
At a time when the cryptocurrency community is on edge and exchanges have committed to disclose POR audits with Merkle evidence, the topic of POR has emerged. A few other exchanges have made their address lists public, and the analytics company Nansen has also developed a dashboard that contains all of the different exchange wallets. When Powell posted his thoughts on Twitter, he also included a link to a document on archive.org titled "Proving Your Bitcoin Reserves."

In this article, we examine how to produce flat listings of accounts and balances, the Merkle technique to proving liabilities, and "Proving assets." The article says that "proving control of assets" is accomplished by "signing a declaration of ownership with all applicable private keys." This "intuitive and easy method" is described as "proving control of assets."

While the paper and Jesse Powell explain that full POR can be easily achieved by using the Merkle approach and proving ownership of private keys, a number of exchange bosses have promised to not only share cold and hot wallet addresses but also Merkle approach-based audits as well. This comes after the paper explained that full POR can be easily achieved by using the Merkle approach. The only thing that remains is for members of the cryptocurrency community to keep these kind of pledges in mind and insist that exchange CEOs live up to them.