Meaning of the Proof of Reserve
In Bitcoin, the Proof of Reserve comes after the case of Mt.Gox. A major Bitcoin trade exchange company in the world. The company was founded in July 2010 and is based in Tokyo Japan.
After an incident that occurred in the case of Mt.Gox, many Bitcoin exchangers and other companies provide such procedures, whether in the form of Proof of Reserve, Multisignature, or external Audit, and others. The goal, so that customers or users can see the company’s liability in the event of bankruptcy. And the main thing is, for a user or a company’s customers can also see that the bankruptcy does not exceed the reserved funds reserves.
Basically, the proof of reserve is a proof that the company has reserves. The proof of this fund reserve is done primarily by Bitcoin exchangers who act like a bank, which holds a Bitcoin balance of its customers.
Furthermore, the proof of reserve in Bitcoin becomes one part of the Audit process procedure. In this case are the exchanger Bitcoin as well as other companies. However, the meaning can not be equated with “audit” , because it is quite different.
But unfortunately the proof of reserve implementation in Bitcoin is not done entirely by accountants who can meet auditing standards like GAAS (Generally Accepted Auditing Standards). So much more likely it is not acceptable to institutions like SIC, BitLicense, and other stakeholders. Even so, it can be said that efforts on this will be a trigger to be more advanced in the future. While indeed, the proof of reserve is also part of the risk-based plan in an overall audit process.
Some exchangers or trade exchange that is considered a pioneer and start applying proof of reserve is based on BitcoinWiki is Vaultoro, Kraken, Bitstamp , and also Uphold .Meanwhile, on the official announcement of BitQuick post their server break-ins , confessed that it was in 2014 also as a pioneer who has applied this Proof of Reserve .
Implementation of proof of reserve conducted by Kraken, according to observations JASON TYRA on tyracpa.com site leaving its own difficulties for auditors to be able to perform testing. Kraken applies the proof of reserve in its own software. Meanwhile, the code in the device is controlled by the clients themselves. According to Jason, it can increase the risk of control that ultimately complicate the auditor in testing. Although, done by this Kraken can have advantages because customers can verify directly.
One of the objectives of the proof of reserves is to be able to ensure a company’s liabilities do not exceed the asset value. In bitcoin, users or users and customers of the exchanger can check on the company’s balance. By checking directly by looking at Blockchain Explorer.So the user can also find out whether the company intent really have enough reserves.Suppose that in a company, the reserve is proportional or exceeds the amount that the company has stated to the consumer. So with that condition, it can be assumed that the company has adequate and accurate fund reserves.
Well, for Bitcoin users in world, certainly can see this as a separate consideration. To be able to choose the best service, to which company, the user will entrust Bitcoin storage and Bitcoin buying and selling process will be done. If, of course, the user or user prefers to store his Bitcoin and other transactions on a third party company, or so-called exchangers.At least this will increase the user’s convenience over Bitcoin’s ownership.