What is Proof-of-Reserves (PoR)? An Alternative to PoW and PoS

Are you familiar with Proof-of-Work (PoW) and Proof-of-Stake (PoS) but find them obsolete? The emergence of new innovation is making a buzz in the crypto space. One of these is Proof-of-Reserves (PoR), a promising alternative to PoW and PoS. In this post, we’ll explore what PoR is and how it works.

How Does Proof-of-Reserves(PoR) Work?

Proof-of-Work (PoW) and Proof-of-Stake (PoS) have long been the go-to mechanisms for confirming new blocks on the blockchain. PoW is known as mining, while PoS is referred to as staking. However, these mechanisms are becoming obsolete as the crypto space expands. They consume a lot of energy, which is not sustainable in the long run. Additionally, security is a growing concern in the crypto world.

To address these challenges, a new alternative to PoW and PoS has emerged: Proof-of-Reserves (PoR). PoR is a mechanism designed to ensure that a platform holds enough funds to cover all its client assets. An independent auditor conducts and certifies the PoR to ensure the process’s integrity and anonymity.

The auditor identifies all balances held by the exchange’s clients and aggregates them into a Merkle Tree, which is a prevalent data structure in computer science. Merkle Trees encrypt blockchain data more efficiently and securely, making it easy for anyone to verify that their funds are safely stored and included in the PoR. The process is transparent, public, and immutable, which is what makes crypto different from traditional finance.

The primary goal of PoR is to allow customers to assess an institution’s solvency and liquidity. It provides a means of ensuring that an institution has enough funds to cover all its client assets. With PoR, customers can be confident that their funds are safe and secure. It’s a promising alternative to PoW and PoS that could transform the crypto space.

Conclusion

Conclusively, Proof-of-Reserves (PoR) is a new alternative to Proof-of-Work (PoW) and Proof-of-Stake (PoS). It’s a mechanism designed to ensure that a platform holds enough funds to cover all its client assets. PoR is conducted and certified by an independent auditor to ensure the process’s integrity and anonymity. This mechanism provides customers with a means of assessing an institution’s solvency and liquidity. It’s a promising alternative that could transform the crypto space.