Definition
Proof of reserves is a method of demonstrating that assets exist at a specific point in time.
What Proof of Reserves Shows
- Asset presence
- Snapshot transparency
What It Does Not Show
- Liquidity
- Future access
- Legal ownership
This limitation highlights why proof of reserves does not remove balance sheet risk. Transparency alone cannot guarantee liquidity, legal access, or redemption enforceability under stress.
Why This Matters
Transparency without enforceability can create false confidence.
Related Concepts
Written by Ronnie Huss.