Kraken Passes World’s First Cryptographic Proof of Reserves Audit

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Kraken announced today that it passed a cryptographically verifiable “proof of reserves” audit. The audit is carried out by Stefan Thomas, who verified that the total amount of bitcoins held by Kraken exceed the amount required to cover the balances held by customers. The process employs a variation of the “Merkle Tree” audit method proposed by Greg Maxwell (explained by Zak Wilcox here). The method allows individual customers to cryptographically verify that their balance at the time of the audit was included in the audit. The description of the audit process on Kraken’s website emphasizes that it is merely a first step toward more publicly verifiable accounting practices and says that assets beyond Bitcoin will be considered for future audits. Kraken is honored for its achievement with special promotion for two weeks on Bitcoinity.org, a popular website for Bitcoin market data. In a post to the site thread on Bitcointalk, the creator of Bitcoinity said, “Kraken is getting the shout out for being the first exchange to take some serious steps towards proving their bitcoin solvency. Their solution…is not perfect but it’s better than what any other exchange has done so far.”

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