[dropcap size=small]M[/dropcap]onday, the Canadian-based cryptocurrency exchange Vault of Satoshi, announced the launch of a public proof of solvency service. The company says it is the first to do so — outmaneuvering the third-party auditing efforts of rivaling exchanges.
In essence, Vault of Satoshi is publishing their cold storage for the public to view. Customers can check the company’s total reserves on the website with the company security center and verify the reported reserves with an independent tool.
Because of security concerns, the hot wallet address will not be posted, “so the total value may have a discrepancy of up to 5-6%.”
The team’s Director of Marketing Adam Cochran, wrote:
We have long sought after a way to prove our reserves to the public in a safe and reliable manner, while most exchanges issue a third-party audit, we felt that simply wasn’t open enough – so today at Vault of Satoshi we are proud to announce full proof of solvency and the publication of our cold wallet!
But ensuring user privacy alongside a transparent exchange proved to be “quite an undertaking.” The lead developer of the system mentioned that this system poses risks to the company and explained that there are certain advantages to sticking to the traditional audit. Nevertheless, Vault of Satoshi went ahead with the proof-of-solvency because “with a third party audit there is some delay and a fair bit of overhead as the exchange grows,” and users can check solvency in real time, rather than wait for monthly or quarterly audits.
We’ve seen legitimate concern over Mt. Gox’s demise and discussions over the necessity for regulation to prevent similar meltdowns in the future. But the market is responding with its own solutions to these fraudulence and mistakes. After Mt. Gox, exchanges have been hustling to perform audits to alleviate customer concerns.
Many company CEOs issued a joint statement denouncing Mt. Gox’s actions, which resulted in a torrent of fresh auditing measures. Mid-march, current exchange leader Bitstamp released the results of a third-party financial audit, which found that the exchange held 100% of its deposits. Later in the month, Kraken, an altcoin exchange, passed a ‘proof of reserves’ cryptographic audit. Just last week Coinfloor announced its own OTC services, including a “publicly auditable” system. It is a way to legitimize businesses and draw in uneasy customers and investors.
Now, Vault of Satoshi’s publicized the contents of its cold wallet. In just a matter of two months, exchanges have grown much more transparent.
Redditors seem excited about this, awarding kudos, thanks, and fresh customers. The Canadian exchange and appears to be setting itself apart from competitor exchanges, particularly the dominant Canadian exchange, CaVirtex. In fact, the announcement is merely a piece of a slew of recent company-wide reforms. Last month, the exchange obtained a national Money Services Business license.
In the comments, the company touches on a few additional expected changes. One redditor suggested tweaks to the ordering page. Cochran responded, “Funny you should mention the order page overhaul because we are currently re-working our buy/sell page and then doing some order page clean up too!” It looks like the exchange aims to offer the cryptocurrency community exactly what it wants.