Based on blockchain technology, Chainlink is a network built on Ethereum. It makes it easy to transfer data from off-chain sources to on-chain smart contracts. It provides information on price streams and blockchains. Chainlink Labs happens to be a company that specializes in DeFi. Recently, the company reacted to the Proof of Reserve (PoR) system making headlines in the crypto community.
Should crypto businesses provide their PoR?
November 10 on Twitter, Chainlink has explained which makes its proof of reserve service transparent to users. The network said the crypto industry has come to a stage where it has to make a choice. He specifically stated:Crypto is at a crossroads. Will crypto continue to repeat the mistakes of the traditional financial industry? Or will a better system emerge? A better system is possible, and proof of reserve is one of the ways Chainlink provides the transparency users demand.“.
For Chainlink, the crypto industry must avoid following in the footsteps of the TradFi sector. The network suggested that his reserve proof system is superior on average. He talked about companies showing that they have sufficient reserves of assets, through independent audits and attestations. They thus give users great visibility of the financial assets they hold.
Chainlink adds that if an organization provides no such evidence, “customers and counterparties have no way of verifying whether the institution has sufficient assets on its balance sheet to meet its obligations“.
A proof of reserve system available since 2020
Chainlink first launched its proof-of-reserve service in 2020. The company explains that it designed it in the purpose to help projects on Web2 and Web3. The system makes it possible to automatically check whether the latter have the necessary reserves of assets.
Chainlink’s PoR system is also useful for checking CEX reserves and off-chain bank account balances. Moreover, it allows cross-chain collateral verification as well as real-world asset reserves.
It appears that Chainlink’s PoR system has an array of advantages. This service could be useful for lending protocols, crypto businesses, and traditional financial institutions.
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