Jesse Powell, founder and former CEO of Kraken, says he intends to highlight flaws in the cryptocurrency market, beginning with the issue of exchanges revealing their proof of reserves.
In an attempt to boost transparency, crypto exchanges have scrambled to give proof of a one-to-one ratio of reserves to investor assets after the high-profile failure of FTX.
Powell asserts that a proof-of-reserve audit is legitimate if it includes evidence of client balances and wallet management.
“I said that I would be more forceful when pointing out concerns. This is among them.
The creator of Kraken notes that utilizing a Merkle Tree to enable consumers to authenticate the cryptocurrency they hold on an exchange is “useless” since it does not show the platform’s liabilities.
Merkle Trees are data structures that allow users to rapidly validate certain information without displaying the complete data set.
As per Powell, “The Merkle Tree is hand-waving nonsense without an auditor to ensure that negative balances were not included. The balance sheet is meaningless without obligations.
Merkle Trees were proposed by Ethereum (ETH) developer Vitalik Buterin earlier this month as a way for users to verify their personal balances on cryptocurrency exchanges.