Topic: Proof of reserves? Insurance fund? Best I can do is a random number generator! - page 3. (Read 804 times)

I think you have a good point here because these centralized platforms can always provide fake proof of reserve. They can get funds from somewhere else into their business, conduct audits, and publish a healthy financial report. They will later pull out the funds which they borrowed to balance their account.

An example is crypto.com which withdrew about 280,000 ether ($400m) from its account after publishing its PoR audit report. The funds was transfered to Gate.io's address fueling speculations that the funds was just borrowed to deceive their customers. Most of these firms show only assets without a comprehensive breakdown of their liability. So having a verifiable and constantly monitored wallet would be a good way to start. But even with this, they can still scam thier customers.

CEX is here for profit and nothing more, so everything they say should be taken with a grain of salt. When we add someone like Bankman to that, then the whole thing looks even more tragic considering his real competence to run such a company. What these people are really good at is creating worthless tokens, and that's something they have in common when it comes to selling their nonsensical ideas to anyone naive enough to believe in them.

It really amazes me that such a company could even do business in the US, because what we are seeing now, someone should have noticed and reacted earlier and prevented everything from going to hell. How realistic is it that no one knew about all these illogicalities within FTX until it was too late, isn't there someone who oversees such things?

People who still hold their funds in Binance are either ignorant, not aware of the recent events regarding centralized exchanges & lending and earning platforms or they think Binance is too big to fail. If Binance bites the dust they'll be the ones affected and a million other holders of shitcoins, the BTC network will be just fine with or without Binance.
Many of these stable coins in the market are backed by nothing but thin air, people who think stable coins are backed 1:1 and that is why they hold them for a long time are joking, they print many of them out of thin air and your money may even be lost when you still have your stable coins in your wallet, not to even add that they can freeze your coins in any wallet it is held.
A large number of shitcoins expunged from the market-> BTC drops in price temporarily, but the network remains exactly the same-> Thousands of people learn a valuable lesson in self custody, and that funds are only safu when they have their keys.

I'm not surprised with this development, centralized services will do anything to look trustworthy in the eyes of their customers but we know all they're doing is just marketing and don't actually care about their customers. Proof of reserve my foot, the only time I'll believe a centralized exchange has a proof of reserve is when their reserve/insurance fund are in Bitcoin and held in a multisign offline wallet which they'll sign a message including the Bitcoin address which can be verified by everyone and we monitor the address constantly.

Without that anything they say isn't worth believing. Moreover why would they hold insurance funds in their native token. Obviously they're doing so for them to easily manipulate the price (of funds said to be in reserved). No centralized exchange should be trusted irrespective of how big they're. They're here to make money and they'll lie, deceive everyone until they finally get exposed and exit scam just as FTX did.

For newbies that'll come across this thread, if you still have coins on exchanges, get them off right away. Exchanges aren't wallet to store your coins with them and don't believe whatever excuse they'll give to make you believe they'll look after your coins. Take the security of your coins as your personal business and store them offline in a hardware wallet.

Then just try to imagine how badly it will affect the market if Binance runs away or some authorities shut them down. Remember how it affected the market during the Terra Luna crash? How volatile the market was? Binance has over 800K Bitcoins in their control which they claim as proof of reserves. Their other wallets got millions of Bitcoins which is not their funds. Those funds are user funds. Imagine you woke up and saw Binance was shut down for some reason and the market kept dumping. That will be great chaos in the crypto market. People making this exchange more and more powerful by using their service without understanding the risk. There is nothing we can do if they start manipulating the market.

The screenshot is interesting so can I use it to discuss about stable coins too?

Stable coins must be backed by fiat currencies like the US. dollar. If they are backed by volatile assets like gold, Bitcoin, Ethereum, altcoins, they might lose their pegs anytime. Attacks from whales and market markers can kill stable coin pegs very quickly. A massive crash of Terra and its algorithmic stable coin is example of bad managed treasury can be easily attacked and broken down.

I don't think there's a centralized exchange is being honest with everything they have e.g. their total funds, the reserved funds for SAFU etc, most of them either using random number or exclude/include anything they want in order to make the number looks good (they will use * mark).

I couldn't image if Binance is bankrupt, how bad is the chaos affecting Bitcoin holder since most of people hold their funds in Binance.

One fund, multiple assets:

And we're surprised about this because....it's exactly the one million time or ten million when it happens or some other round number?  
But I don't get something, is this about two different funds because, and I'm quoting you just to make things easy:


But , but , but, CZ said #SAFU, CZ helped millions make money, CZ is great, ...CZ is whatever god your timezone has!
Are you spreading FUD here?  

This is definitely not shocking to me. It's very obvious now that centralized exchanges / service providers will do anything just to trick users to patronize their services. If FTX went as far as publishing insurance numbers out of thing air with no actual asset to back it up, I'm convinced that some CEX available today still indulge in those practice.

In response to FTX collapse, tons of exchanges rushed to start providing proof of reserves. The way it works is that they simply publish some numbers at specific intervals - they leave no way to verify but want users to trust them.

 "Here's the numbers: trust us, we already verified the numbers so you don't have to. "

 

If you've not been following the FTX trial, you really should, because the level of fraud on display is enough to even rival that of CSW. Here are two snippets of code (pictures courtesy of https://nitter.cz/molly0xFFF) which have been submitted as evidence in the trial. This code is regarding FTX's insurance fund which was widely publicized:

   

The first picture above shows how the value of 5,250,000 FTX Token supposedly in the insurance fund was "calculated". It wasn't. It was just coded in. insuranceFund.size = 5250000 FTT.

The second picture above shows how the value of USD in the insurance fund was "calculated". The daily trading volume on FTX was multiplied by a random number, and this was used to adjust the insurance fund to a new size.

This is the kind of bullshit centralized exchanges are using in their "proof of reserves", "safu funds", "insurance funds", "collateral funds", "1-to-1 matching reports", and all the other trash they peddle to convince you your funds are totally safe. Literal random number generators. They will do and say anything to get you to hand over your coins to them. Don't fall it.