CoinDCX Is Releasing its Proof-of-Reserves: A Major Leap of Trust

Today is the time when cryptocurrencies are going through 

A highly unstable phase and the recent series of events has caused a steep fall in the levels of trust vested in centralized players. 

However, to ensure that customers do not get repelled by the idea of cryptocurrencies, industry leaders are coming forward and taking the responsibility to make their operations as transparent as possible. 

In light of these scenarios, CoinDCX, India’s leading crypto exchange released its Proof-of-Reserves report to the public, showcasing their holdings along with respective wallet addresses. 

CoinGabbar is diving deeper into understanding the Proof-of-Reserves report released by CoinDCX and understanding how it can impact the users’ trust in the long run. 

What is Proof-of-Reserves?

Proof-of-Reserves is a process under which independent third-party auditors go through the customer assets of a centralized exchange to ensure that the exchange has enough assets to liquidate all the holdings of their users. Proof-of-Reserves recently gained traction when a leading centralized exchange turned into dust overnight only because all of its assets were stored in its native token.

Proof-of-Reserves audits are done by third-party auditors to cut down the possibilities of any bias and they are provided with the cryptographic signatures of the users' assets to validate that the value of their total holding is more than the possibility of customer withdrawals. 

Third-party Proof-of-Reserve audits would enable the centralized exchange to present its objective assessment of the levels of liquidity that they have in their wallets. These audits ensure compliance and the reputed certifications enable the users to trust the project as auditors have no interest in whitewashing shady organizations. 

Binance was the first centralized crypto exchange that came forward to release its Proof-of-Reserves reports followed by other players in the industry. Indian crypto exchanges are not far behind in making their holdings public and centralized exchanges such as SunCrypto, CoinSwitch Kuber, and CoinDCX have already released their Proof-of-Reserve reports.

CoinDCX’s Proof-of-Reserves: A Step Towards Transparency

CoinDCX is a leading Indian crypto exchange, catering to millions of Indian crypto investors since 2018 by Sumit Gupta and Neeraj Khandelwal. CoinDCX has been operating in the Indian crypto space and is known to make crypto accessible to Indians through its user-friendly UI.

CoinDCX has made headlines by releasing its Proof-of-Reserves reports in a series of attempts by the organization to strengthen the trust of its customers on the exchange. Sumit Gupta, the face of the Indian crypto space and Co-Founder of CoinDCX tweeted yesterday that CoinDCX is doing everything under the sun to prove that all the users' funds are completely safe. This is a welcome move by an industry leader and could assist in regaining the investor’s trust.

Sumit Gupta released the Proof-of-Reserves reports of CoinDCX on 24th Nov.

Sumit Gupta also shared the fact that these reports were made public with Nansen, a leading crypto auditing company with expertise in on-chain and off-chain balances. Nansen also helped other Industry giants such as Binance, OKX, Huobi, Bybit, and others in releasing their Proof-of-Reserves reports.

As per the released reports, CoinDCX’s total user funds are close to $126 million with the majority of its holdings being in Bitcoin (13.51%) followed by ETH (12.58%), and Shiba INU (11.62%). Other significant tokens in the CoinDCX wallets are ADA, XRP, USDT, and BNB. 

The most valuable wallet of CoinDCX (0x8c7Efd5B04331EFC618e8006f19019A3Dc88973e) holds over 10K ETH and is valued at more than $12 million. The majority of the chain allocation of CoinDCX is on Binance Chain followed by Ethereum mainnet and Bitcoin. 

You can read the complete Proof-of-Reserves of CoinDCX by clicking here.

Why Proof-of-Reserves is Important?

Proof-of-Reserves are becoming a significant symbol of trust for centralized crypto exchanges due to the recent series of unfortunate events. FTX Global, one of the world’s leading centralized exchanges, collapsed within days because the majority of its holdings were in FTT (FTX’s native token). 

When the price of FTT started falling after a massive dump from Binance, the value of the exchange fell drastically, causing a massive liquidity crunch to continue with user withdrawals.

FTX had to cease all customer withdrawals and eventually file for bankruptcy only because they did not have the required liquidity to cater to sudden user withdrawals. 

This is where the Proof-of-Reserves come into the picture, if FTX would have to make its holding patterns public, it might not have all of its liquidity in its own token. Proof-of-Reserves compels the centralized exchanges to maintain enough liquidity that can cater to customers' withdrawals without facing any liquidity crunch. It would be no exaggeration to say that FTX’s fall could be avoided with Proof-of-Reserves. 

The Steps CoinDCX is Taking to Gain Users’ Trust

CoinDCX is trying its best to make its operations as transparent as feasible for its customers. The released Proof-of-Reserves report is available for all users and can be verified by anyone. By sharing a Proof-of-Reserves report, CoinDCX has made its accounts available for user scrutiny. Steps like these followed by the audits of the company’s financial health ensures the customers that their funds are safe with the exchange. 

Sumit Gupta also shared that Team CoinDCX is working with reputed auditing firms to share a report on the company’s financial health.

This Proof-of-Reserves report is going to assure the customers of CoinDCX that their funds are backed by sufficient assets in the exchange and majority of their liquidity is not in their own tokens as it was for FTX. 

It might be strange for investors to see Shiba INU as the third largest holding of CoinDCX, however, Shiba INU is one of the most favorite tokens of crypto exchanges. As a matter of fact, Binance holds 8% of the total Shiba supply worth more than $800 million followed by Crytpo.com, holding Shiba worth more than $500 million. According to the Etherescan, both of these leading exchanges are the second and third largest Shiba whales respectively. 

The Way Forward

The Proof-of-Reserves report released by CoinDCX is a welcoming step that can establish a new standard within the industry. When the leading crypto exchange come forward in sharing all of its on-chain holdings with its users, it depicts the credibility of the organization and enables the development of a safer investment ecosystem.

A massive shift towards decentralized crypto exchanges is real, and to protect the user base of centralized players they will have to make their operations trustable and their policies user-friendly. The crypto space has a dignified place for centralized exchanges and they are going to stay in the industry as long as they would keep working towards making cryptocurrencies accessible to new users.

Do you think that CoinDCX’s Proof-of-Reserve is going to help users in gaining the trust of their customers? Share your views in the comments below.