- Proof of Reserve or, in layman’s language, crypto audits in blockchains are now the new criteria for secure blockchain companies.
- Africa’s crypto Industry is shrouded in scams; PoR is a stamp of authenticity.
- South Africa is among the few countries in Africa to conduct a Proof of Reserve audit.
Africa’s crypto ecosystem is a steadily growing community that has acquired the attention of the whole globe. Applying blockchain technology within financial systems has proven effective and beneficial to the economy. However, it is still prone to crypto hacks and attacks. The recent FTX crash and the massive fall in crypto value required new and improved blockchain security measures to ensure crypto safety. Proof of Reserve or, in layman’s language, crypto audits in blockchains are now the new criteria for secure blockchain companies.
Although where does the concept of Proof of Reserve intertwine with Africa’s ecosystem? If so, how does it generally benefit? You need to know the facts to further your blockchain security know-how.
Proof of Reserve; What does it’s mean
One of the few detrimental factors to Africa’s and the globe’s crypto ecosystem is the level of trust. Unfortunately, the sophistication of hackers has evolved over the years. Knowing the difference between a legitimate and secure blockchain company takes some work. Thus many have suffered at the hands of blockchain companies rolling back on a product or completely disappearing with users’ money. Security is only as strong as its weakest link, and blockchain security appears to be a hanging cliff to the success of blockchain technology in Africa.
This revolutionary concept in blockchain security emerged, Proof of Reserve.
Third-party auditors conduct crypto audits in blockchain or proof of reserve audits. This creates a snapshot of all the company’s balances to show the evidence or “proof” that they are handling their currencies well. This initiative ensures crypto safety in terms of confidence in the product or service received from secure blockchain companies.
It adds confidence to crypto traders that the company they are conducting trades in or storing their crypto coins is not at risk of a liquidity crisis. This builds trust, addressing one of the weak core links in all blockchain security and ensuring crypto safety.
Finding trustworthy self-custodians, exchange wallets, and third-party custodians is cumbersome. As the crypto adoption rate in Africa continuously grows, it is required to prove that they can provide their services without worrying.
What it highlights
Before Proof of Reserve, custodial financial platforms used to store the digital assets of crypto traders would not provide full custody of assets to their users. This is because they would keep private keys to these addresses to prevent theft from hackers. Typically, previous blockchain security experts would merely trace an individual’s user’s protein o the total asset. If a whole report were required, it would only generate the custodial platform’s total assets.
Proof of Reserve gives a deeper view into this blockchain security measure. This is accomplished by analyzing every financial aspect of a secure blockchain company. If the blockchain company is unable to attain a 100% proof of Reserve, auditors warn traders they may be prone to:
- Asset misappropriation
- Delay or inefficiency in cashing out assets.
- Inability to cash out assets during crowded withdrawal request
- The platform is prone to bankruptcy or suffering asset losses.
Crypto audits in blockchain soon became necessary to promote transparency while retaining customer privacy.
Why is proof of Reserve crucial in Africa’s ecosystem
Crypto audits in the blockchain is very vital. Since digital currency is slightly different from fiat currencies, it still needs accounting.
The essence of this blockchain security measure is to provide transparency when dealing with cryptocurrency. Digital currency in Africa already has a sizeable sceptical crowd, especially after the FTX Crash. The sudden collapse o the crypto ecosystem caused many secure blockchain companies to lose their valued customers. In addition, various African governments further used this as an excuse to deny the incorporation of digital currencies within their ecosystem. Thus proof of Reserve acts as an official stamp proving that hay can handle their customer’s funds.
How South Africa is leading by example
South Africa is among the few countries in Africa to conduct a Proof of Reserve audit. Luno, South Africa’s largest cryptocurrency exchange, underwent the rigorous process of independently verifying the existence of customer funds through PoR.
This permanently placed Luno, the first African exchange company to undergo a crypto audit in its blockchain capabilities, setting a solid lead in Africa’s crypto industry. Revix, another South African cryptocurrency investment platform, underwent the same process setting an example for the entire African crypto community. Because of the bold step conducted by the two organizations, South Africa’s crypto adoption rate skyrocketed, not just among its crypto traders. Its governments got on board with the concept of digital currency, allowing the nation to recognize crypto as a financial asset.
As much as auditors conduct this blockchain security measure within the various systems of a secure blockchain company. It mainly catered to mitigating the human aspect of security. Showing their users that they are competent in ensuring crypto safety lessens the burdens on crypto traders. It also boosts the number of new users acquired.
Wiehann Olivier, Digital Asset Leas and Partner at Mazars South Africa, explained that PoR is just a type of assurance engagement. It is also known as an Agreed-up procedure or an AUP engagement. It lists the procedures that need to be performed by an independent auditor and outlines how the auditor will consequently report n the tangible outcome of each procedure.
Unmistakable value of proof of reserves
Focusing on how South Africa has drastically progressed with cryptocurrency ad blockchain should be proof enough. The new nature of blockchain and crypto is what governments fear as it represents unknown risks that could potentially damage a country’s economy. Fortunately, crypto audits in blockchain help provide a sense of trust and proves that assets can be kept secure.
Unfortunately, crypto scams and fraudulent activities have filled Africa’s crypto ecosystem. Most individuals even think crypto is a scam; ensuring crypto safety and authenticity purges these norms. A proof of Reserve at the moment represents a stamp of a secure blockchain company and is necessary.
This blockchain security measure is a must, and any crypto trader should carefully choose where they store their funds. After the FTX crash, the crypto ecosystem is still recovering but still in treacherous waters.