Proof of reserve
A verification method that shows an issuer or custodian holds assets equal to or greater than the tokens or customer balances it has outstanding.
Also called: PoR
Proof of reserve is a process for demonstrating that liabilities are backed. It can take the form of a cryptographic snapshot of onchain wallets matched against customer balances, often using a Merkle tree, or an automated data feed that publishes reserve figures for smart contracts to check.
Onchain reserves can be verified directly, while offchain reserves such as bank deposits or vaulted bullion depend on custodian or auditor data brought onchain. A robust proof covers both assets and liabilities; showing assets alone does not prove solvency.
The practice spread after exchange failures in 2022 exposed customer shortfalls. For allocators it is a useful but partial safeguard, weaker than a full audit. Example: oracle networks such as Chainlink publish reserve feeds for wrapped and tokenized assets, so a minting contract can halt issuance if reported reserves fall below supply.
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Part of the BlockWest Glossary, plain-language definitions for markets, AI and digital assets. Educational content, not investment advice.