Four Years After FTX Collapsed, Crypto Exchanges Still Can't Truly Prove They're Solvent — Here's Why That Should Worry You
15h ago · 1 source
Despite the FTX collapse serving as a wake-up call for the crypto industry, exchanges still largely rely on proof-of-reserves methods that show they hold assets but fail to account for hidden liabilities. This means users still can't fully verify whether an exchange is truly solvent. The gap between proving assets and proving solvency remains a critical unresolved problem in the industry.
WHY IT MATTERS
Imagine you deposit money at a bank. You'd want to know the bank has enough money to pay everyone back, right? That's called 'solvency' — having more assets than debts. After the FTX exchange collapsed and lost billions of customer funds, crypto exchanges started publishing 'proof of reserves,' which is like a bank showing you its vault full of cash. The problem? They're showing the vault but not showing the credit card bills. An exchange could have tons of crypto in its wallets but also owe even more money to lenders or other parties. Without seeing both sides — what they own AND what they owe — you can't really know if your money is safe. This is why many crypto experts recommend keeping your crypto in your own personal wallet rather than leaving it on an exchange.
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Educational only — not financial advice.