Is a proof of reserves an audit?

No. An audit is performed by a third party who examines both assets and liabilities and puts their name to the result. A proof of reserves is published by the exchange about itself, covers assets only, and in most cases nobody outside the company has checked it.

What is the Merkle tree for?

It lets an individual customer verify that their own balance was counted in the total the exchange published. That is a real check and a narrow one: it proves you were included in a sum, not that the sum covers what the exchange owes everybody.

Should I avoid an exchange that does not publish one?

Not automatically. Coinbase publishes none and still scores above the six exchanges that publish one and have nothing else, because a public listing forces audited accounts covering far more. What matters is what evidence exists, not the format it arrives in.

Why is this only worth four points out of ten in the score?

Because seven of the eight exchanges ranked here have one, and a signal almost everybody has cannot separate them. An audit by a named third party is worth another four, and a public listing three, because those are the parts somebody outside the company signed.

What a proof of reserves proves, and what it does not

What the thing actually is

A proof of reserves is a snapshot. The exchange publishes a list of wallet addresses it says are its own, on a date it chooses, usually with a Merkle tree so that any customer can check their own balance was included in the total. Nothing about that is fake and nothing about it is nothing. It is genuinely more than the exchanges of ten years ago offered, which was a sentence on a website.

But read what it claims: these coins existed, in these wallets, at that moment. Every word of that can be true at an exchange which is insolvent, and the reason is that it is one side of a balance sheet published without the other.

A balance scale. The left pan is visible and loaded; the right pan is hidden behind a panel, so the beam can be seen but nothing on that side can be weighed. — A proof of reserves weighs one pan and publishes the result.

The three questions it does not answer

Each of the three below is the difference between an exchange that can pay everybody and one that cannot, and a reserves page addresses none of them.

Does a proof of reserves show what an exchange owes?

No, and this is the whole of it. Assets without liabilities is not a solvency statement. An exchange holding a billion dollars of bitcoin and owing its customers two billion passes a proof of reserves with room to spare, and the page it publishes is entirely true. Solvency is the comparison of the two columns; the format only ever contains one of them.

Two columns side by side. The left one is filled in solid; the right one is an empty dashed outline that was never filled. A rule crosses both, inviting a comparison that cannot be made. — The column on the right is the one that decides whether you get paid.

Can an exchange borrow the coins for the day of the snapshot?

Yes, and nothing in the format would show it. The snapshot is taken on a date the exchange chooses and announces. An exchange that borrows assets so as to be holding them on that day publishes a page which is true about a false position, and a reader checking their own balance in the Merkle tree would find it exactly where it should be. This is not hypothetical bookkeeping — it is the ordinary reason a single-date attestation is worth less than a continuous obligation.

A timeline with a camera shutter above one tick. Under that tick the holdings are piled high; on every other date along the line they are sparse. — Every date on this line is true. Only one of them was photographed.

If the exchange fails, are the coins yours?

That is decided by the terms you accepted and the law where the company is registered, and a wallet snapshot has nothing to say about either. Customer assets can be your property held on trust, or they can be part of the estate you queue up as a creditor against — the wallets look identical from outside either way.

A vault building holding a grid of identical boxes, with a dotted line drawn through the middle of the grid. The boxes on either side of the line look the same and belong to different people. — Nothing on the outside of a wallet says which side of that line it is on.

What the eight exchanges here actually have

This is our own record, and it is the reason the phrase is nearly useless as a way to choose. Almost everybody has one. Almost nobody has the thing it is a substitute for.

Solvency evidence across the eight exchanges ranked here

Publish a proof of reserves	7 of 8 — all except Coinbase
Audited by a named third party	2 of 8 — Coinbase and Kraken
Listed on a public market	1 of 8 — Coinbase
Score for a proof of reserves alone	4 points out of 10
Score for an audit, or for a listing	4 points, and 3 points

A signal that seven of eight competitors also have cannot tell them apart. That is why it is worth four points here and not ten.

The exchange that publishes none of it and still beats six that do

Coinbase publishes no proof of reserves at all and scores 7.0 on solvency evidence in the exchange rankings — ahead of all six exchanges that publish one and have nothing else. That is not a mistake in the model, it is the point of it.

A company listed on a US exchange files audited accounts on a schedule somebody else enforces, with both sides of the balance sheet in them, signed by an auditor who can be sued for signing. That is a continuous obligation to a regulator rather than a page the company chooses to publish. The thing a proof of reserves is a substitute for is the thing a filed annual report already is. You can read the reasoning on the Coinbase record.

The highest score on this component is Kraken’s 8.0, and it is worth understanding why: a proof of reserves and an audit by a named third party, but no public listing. Two kinds of evidence beat one kind plus a listing, on our weights. Reasonable people would weigh those differently, which is the reason the weights are printed rather than described.

Three bars of increasing length. The shortest is an empty outline, the middle one is half filled, and the longest is filled solid and carries an official seal. — A page you publish about yourself, a name that signed it, a filing somebody else enforces. Only the last one has a deadline.

How to use it, then

Treat it as a floor and not a finding. An exchange that publishes nothing at all in 2026 is telling you something; an exchange that publishes a reserves page is telling you almost nothing, because so does nearly everyone.

What separates them is the evidence that somebody outside the company had to sign: an audit, a listing, a regulator with a filing deadline. That is what our solvency scoring weighs, and why the component is called solvency evidence rather than solvency — nobody outside an exchange can know it is solvent, and a directory that implied otherwise would be selling a certainty it does not have.

The question underneath all of this is the one that runs through every record on this site: which company is actually holding your money, and what is it obliged to do. For brokers that argument is set out in which company you are signing with, and it is the same argument here.

What a proof of reserves actually proves

Does a proof of reserves mean my money is safe on an exchange?