Hats off to Kraken, who now let users verify that the balances they hold are backed by real assets

While I'm not the biggest fan of centralized exchanges, I think it's still the best way for noobs to learn about crypto. In this sense, the trust relationship between holders and CEXs is crucial: when you buy BTC or ETH, you want the exchange to actually own these tokens.

That's why I was very pleased to learn today that Kraken has just launched a new way for their customers to verify, with cryptographic proof, that their tokens are actually in their accounts.

It's called "proof of reserves", and here's how it works. Twice a year, an auditor takes an anonymized snapshot of all balances held and aggregates them into what is called a Merkle tree, a private database that encapsulates all client balances. Some cryptographic magic happens (the actual operation is quite complicated to go over in this post), and voilà! Users can now verify their balances with a few clicks.

You don't have to take Kraken words for granted : they can prove to you they're actually holding the tokens you bought.

In full disclosure, I have to say that I've been a Kraken customer since I started in crypto, so I'm not entirely neutral. However, in my opinion, this kind of practice allows our ecosystem to gain credibility. The days of Mt. Gox and Quadriga are well and truly over!