PoR
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Bottom Line: At the end of the day, this is a very simple concept, that custodians need to be able to prove that they are indeed holding the assets that their clients have entrusted to their care. This is called Proof of Reserves (PoR). --Reggie (talk) 07:44, 23 June 2022 (UTC)[1]
Background: As the digital assets industry has developed, both consumers and institutional investors have relied on large custodians, exchanges, and other intermediaries to custody their assets. These intermediaries are entrusted with maintaining adequate digital asset reserves to meet customer liabilities (those digital assets the exchange or custodian holds for its customers). --Reggie (talk) 07:44, 23 June 2022 (UTC)[1]
The Problem: The growth of the industry has resulted in uneven and inconsistent methods for proving the existence of reserves to meet customer liabilities. Investors and customers need assurance that their funds are properly managed. Digital assets by their very nature offer built-in transparency but, until now, the innate cryptographic auditability of these assets has been woefully underutilized, despite the low technical barriers to doing so.--Reggie (talk) 07:44, 23 June 2022 (UTC)[1]
With PoR, the cryptocurrency holdings of a company can be easily audited through an automated process that leverages the transparency of blockchains, smart contracts and oracles.
This real-time auditing of collateral helps to ensure that user funds are protected from “unforeseen fractional reserve practices and other fraudulent activity from off-chain custodians.” In doing so, PoR helps to bring a higher degree of transparency to the crypto ecosystem as a whole and it addresses some of the biggest complaints about how the current financial system operates. --Reggie (talk) 08:52, 20 June 2022 (UTC)
https://chain.link/case-studies/celsius - Good quotes in this article. "As users and developers adopt more blockchains and layer-2 networks, liquidity becomes siloed across the ecosystem. Unlocking this fragmented liquidity through wrapped tokens and creating more interoperability is a critical challenge for the ecosystem to solve. Without a solution to this issue, the benefits of permissionless composability are reduced and developers need to start from scratch every time a new ecosystem is bootstrapped.
But how can projects make sure that wrapped tokens remain sufficiently collateralized when connectivity between different blockchains is inherently limited? While ensuring that wrapped tokens are collateralized at all times is critical for a robust cross-chain ecosystem, using centralized intermediaries and manual audits introduces efficiency bottlenecks and centralization risks.
An automated process is required that helps secure the minting and redemption of wrapped tokens and enables Celsius to securely, transparently, and reliably audit reserves so that users can move assets between blockchains and provide cross-chain liquidity." --Reggie (talk) 08:53, 20 June 2022 (UTC)