Glossary
Proof of reserves
An exercise intended to demonstrate that a custodian holds assets matching customer balances, usually combining on-chain balance evidence with a commitment to the liability set.
The asset side is comparatively tractable: address balances are public and control can be demonstrated by signing. The liability side is where the exercise is weak — the total owed to customers cannot be independently recomputed from an opaque commitment, and a provider can in principle understate it.
It is also a point-in-time snapshot. Assets can be borrowed before the measurement block and returned after, and off-chain liabilities, debt and encumbrances sit outside the exercise entirely. Reserves are not solvency, and a proof of reserves is not an audit.
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