Chainlink Touts Proof-of-Reserve as Solution to Crypto Contagion

source : cryptopotato.com

https://cryptopotato.com/wp-content/uploads/2022/09/Chainlink.jpg

The crypto contagion has continued this year, with FTX compounding matters this week. This has put the spotlight on transparency, especially for centralized crypto exchanges.

Data oracle provider Chainlink has been promoting its proof-of-reserve tools, which could solve the transparency issues currently plaguing the industry.

In a tweet on Nov. 11, the Chainlink team asked if crypto will continue to repeat the mistakes of the traditional black-box financial industry.

Chainlink PoR

Proof-of-reserve is also known as money-in-hand or a reserve or treasury backing up tokens or assets. They can be used by organizations to verify that there are sufficient reserves that have been independently audited. This will give customers more confidence in the asset or organization. Chainlink cited some examples:


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“PoR is also useful for verifying centralized exchange asset reserves, off-chain bank account balances, cross-chain collateral, real-world asset reserves, and much more.”

Its proof-of-reserve tools were first launched in 2020, but they have come to light again following this week’s FTX meltdown.

According to the website, Chainlink PoR utilizes the “largest decentralized collection of security-reviewed and Sybil-resistant node operators in the industry” to acquire and verify reserve data.

The PoR contracts can carry out multiple functions, such as scheduling regular automated audits. Additionally, they can protect DeFi applications from insolvency by auditing the reserves of tokens used as collateral.

In September, Chainlink launched a program called SCALE for sustainable access for layer 1 and layer 2 enablement.

On Nov. 9, Binance CEO Changpeng Zhao said all crypto exchanges should do Merkle-tree proof-of-reserves. “Banks run on fractional reserves. Crypto exchanges should not,” he added.

Furthering its commitment to transparency, Binance published cold wallet addresses and balances for 6 of its 600 coins on Nov. 10. It added that the rest will follow along with a PoR system.

The FTX “bank run” has caused markets to crash to a new bear cycle low this week. However, they’ve started to recover a little as the weekend approaches.

LINK Price Outlook

The native Chainlink token, LINK, has been hit hard, tanking to a four-month low of $6 yesterday. LINK has recovered 8% on the day, however, in a move back to $6.95 at the time of writing.

LINK is down 86.6% from its May 2021 all-time high of $52.70, according to CoinGecko.

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