How Does the ‘Proof of Reserves’ Mechanism Relate to Custodian Transparency?

Proof of reserves is an auditable mechanism that allows a custodian to cryptographically demonstrate that they hold the assets they claim to hold on behalf of their clients. It typically involves a Merkle Tree structure and cryptographic proofs.

This increases transparency by allowing clients to verify their assets are accounted for without revealing the total liabilities or individual holdings of other clients.