PROOF OF RESERVES PROCESS

Proof of Holdings or Proof of Reserves, Real-Time Transparency, and other similar phrases have been growing and resonating across the crypto currency industry.

Exchange and wallets audits, in their current form, are very unreliable. Insolvency has occurred numerous times in the Bitcoin ecosystem, either via hacks, mismanagement, or outright fraud. Users must be diligent with their exchange selection and vigilant in their use of exchanges.

Even then, a savvy user will not be able to fully eliminate the risks. Further, there are exchange users like traders and businesses who must keep non-trivial fiat balances in exchanges at all times. In financial language, this is known as the "counterparty risk" of storing value with a third party.

We believe it's safe to conclude that exchange and wallet audits in their current form are not very reliable. These processes do not guarantee users that a custodian or exchange is solvent. Although there have been great contributions to improving the exchange audit processes, like the Merkle tree approach, major flaws still remain.

UBX's Proof of Reserves configuration is novel because it simplifies the process of proving that the total number of UBXs in circulation (liabilities) are always fully backed by an equal amount of Stablecoin currency held.