OKX Security Special Edition | PoR Section: Unlocking Trust in Three Steps: "Verifiable, Health Level, Sufficiently Payable"

In today's world where encryption is gradually integrating into mainstream financial systems, trust remains the foundation for building all value circulation mechanisms. As the industry expands and the architecture evolves, a core issue has gradually emerged: 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. Far from being a simple "display fund" tool, it is also a cornerstone solution that gives the system the core capabilities of self-certification and transparency, risk early warning and user protection. As the world's leading exchange and on-chain technology company, OKX is actively promoting the deepening and application of PoR technology.

Scene 1: PoR transformation from "trusted intermediary" to "verifying intermediary"

Cross-chain assets were born to solve the problem of fragmentation of the blockchain ecosystem, but their design naturally places users in a new trust model. For example, WBTC, one of the most liquid wrapped assets of BTC, adopts a centralized custody model - users deliver bitcoin to a custodian in exchange for wrapped assets on Ethereum, a process that relies on BitGo's centralized custody and regular reserve publicity. BitGo made public the proof of assets in 2019, and its proofs include the BTC mainnet, the address of the Ethereum mainnet, and the total amount of BTC escrowed, proving to users whether BTC:WBTC is 100% backed by reserves.

However, at the same time, this design also indicates that the on-chain assets and native assets are not in a 1:1 atomic exchange. Users must trust that the intermediary will not make operational errors, will not lose private keys, and will not change the custody address without disclosure.

Similar challenges also exist in decentralized cross-chain protocols, such as Wormhole and LayerZero, which introduce multi-signature and validator networks in their design, publicly share contract addresses and held funds, enhance resistance to manipulation, and reduce the risk of malicious activities. However, even if the contract code is completely open source, if the underlying asset reserves lack verification mechanisms and methods, their security is still insufficient to support scaled financial activities.

The essence of this dilemma is the urgent need for transparency and verifiability after users relinquish control of their assets. Whether centralized or decentralized, it is only through a verifiable proof-of-reserve mechanism that a "trust intermediary" can 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 self-verify the accuracy and completeness of data, allowing fund custodians or controllers to independently verify the existence, matching, and retrievability of their custodian assets instead of relying solely on brand trust.

In response to 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"

Reserve transparency and health have always been key focuses in the encryption industry. Ultimately, all crypto financial companies need to address whether they have sufficiently high-quality reserves, whether they are truly held in custody, and whether they can be redeemed instantly.

For example, Tether (USDT) is one of the most widely circulated stablecoins in the crypto market, emphasizing that each token is always worth $1. However, during 2017–2021, Tether experienced questions about its reserve structure, a storm over the overproportion of commercial paper, and regulatory investigations, which even led to a brief de-pegging of USDT in 2022. In recent years, Tether has attempted to rebuild trust in the market by removing its exposure to commercial paper to a higher proportion of cash and Treasury assets, introducing third-party audits (BDO, one of the world's top five independent public accounting firms), and increasing the frequency of disclosure of its asset reserves.

This indicates that sufficient redemption capability requires not only proof of adequate capital reserves but also verification of the quality of asset composition. A series of events in the encryption industry has confirmed a consensus: reserve transparency, asset liquidity, and audit independence are all indispensable. The EU's Markets in Crypto-Assets Regulation (MiCA) also clearly states that stablecoin issuers need to regularly disclose the composition and management of their asset reserves, as well as custody policies.

OKX has set the benchmark for transparency in this regard: as a platform for hosting mainstream stablecoins such as USDT and USDC, OKX not only publishes reserves for 22 assets on a monthly basis, but also has a reserve ratio (>100%), and ensure that the structure of reserve assets is clear and healthy - the four core assets of BTC, ETH, USDT, USDC account for 66%, and the top ten assets cover 88.8%, avoiding excessive concentration in low-liquidity tokens. The health of the reserve structure is very important for a financial company's ability to resist risks, and in terms of auditing, we will also cooperate with Hacken, an independent third-party auditor, to conduct regular monthly audits and disclose the audit process and on-chain data.

Scenario 3: PoR upgrade from "asset existence" to "liability constraint"

The collapse of FTX has pushed the trust crisis of exchanges to its peak, profoundly revealing that the existence of assets does not equal the safety of funds. The core issue with FTX is that the platform inflated its solvency through off-balance-sheet debt or related party transactions. Even though reserves "exist," the "solvency" has long since collapsed. Alameda Research used FTT tokens as collateral to obtain loans, creating a false impression of sufficient assets, while user deposits were redirected for high-risk speculation.

This type of event reflects that: proof of reserves cannot stop at the existence of assets, but must upgrade to asset-liability matching. That is, it is not only necessary to prove that "user funds are present," but also to prove that "the platform does not owe more money."

The OKX PoR Evolution Path provides a solution to such systemic risks, evolving from the Merkle Tree to the zk-STARK upgrade: version 1.0 ensures that the platform owns users' assets, and the zero-knowledge proof upgrade proves that OKX can redeem user assets (assets ≥ liabilities) at any time. Under the constraints of zero-knowledge proofs, users can ensure that their assets are included in the calculation and verification of data, that no account is missed, and that there is no negative balance in user accounts, which can ensure that the exchange will not have problems such as misappropriation of user funds and inflated debts.

This evolution is an inevitable path in the transparent evolution of the entire encryption financial system, providing a bottom-level trust structure with payment guarantees for the encryption financial industry. The shift from periodic audits to mathematical constraints and on-chain consensus allows solvency to become a self-evident system attribute.

Conclusion

Although the backgrounds of the above three scenarios are different, they reflect the gradual formation of industry consensus: the security of user assets cannot rely on institutional self-commitment, but must establish "trustless" infrastructure. From the transparency of reserves and the health of reserve structures to further cryptographic self-certification capabilities, PoR builds the foundation of trust in every corner of the encryption finance world.

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

OKX has upgraded PoR from an "audit tool" to a "trust infrastructure" through technological innovation and institutional design. This practice is revealing the future direction of the industry: only by combining on-chain data, technological proof, and system institutions can the entire industry truly achieve a leap in security.

Disclaimer:

This article is for informational purposes only. The views expressed in this article are those of the author and do not necessarily reflect the views 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 a high level of risk and can fluctuate significantly. You should carefully consider whether trading or holding digital assets is suitable for you in light of your financial situation. Please consult your legal/tax/investment professional regarding your specific situation. You are solely responsible for understanding and complying with applicable local laws and regulations.