📜Proof of Reserves Preparation Checklist

This Checklist is intended for digital asset exchanges and custodians who are looking to prepare for their 1st Merkle Tree Proof of Reserves!

The concept of Proof of Reserves is new to many companies and may seem daunting. However, completing a Merkle Tree Proof of Reserves is relatively straightforward once you have a gameplan in place.

Reminder: Merkle Tree Proof of Reserves are usually completed by exchanges, custodians, and platforms holding assets on behalf of customers.

TNF's Proof of Reserve Prep Checklist is intended to help your company prepare for your first Proof of Reserves. Usually, completing the first Proof of Reserves is the most time consuming. But, once your team is familiar with the requirements, steps, and attestation process, the procedures can be completed relatively quickly.

Proof of Reserve Preparation Checklist

This Proof of Reserves Prep Checklist is intended to help streamline the preparation for your first Merkle Tree Proof of Reserves. After reviewing the sections below, you will be ready to complete the Proof of Reserves attestation process.

Each section is made up of between 2 and 6 steps. Click on each tile below to learn more about each preparatory step. The steps are meant to be contemplated in order. After completing these preparatory procedures, you will be ready to complete the Proof of Reserve attestation process.

1. General & Scoping

2. Creating the Customer Liability Extract

3. Creating the Merkle Tree

4. Proving Asset Balances

5. Reporting & Disclosure

Summary Checklist of Activities

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FAQ

What is the most time consuming part of the Proof of Reserves Process?

Typically, for the platforms, the most time-consuming part is usually creating the customized Customer Liability Extract report. Usually, our key contact has to work with the engineering or data teams to create a custom report from the platform database. The good news, is that once the report parameters has been created, it's usually "rinse and repeat" for future Proof of Reserves.

How long does a Merkle Tree Proof of Reserves usually take?

If you have completed the Prep Checklist and client onboarding, and all parties are motivated, you can complete the first Merkle Tree Proof of Reserves within 2 weeks. Future reports can be completed as in little as one week.

Who is responsible for creating the Merkle Tree?

The attestation provider is ultimately responsible for creating the Merkle Tree, because the attestation provider usually publishes the Merkle Root Hash within the attestation report. However, it is also a good idea for the DASP to re-create the Merkle Tree and "check" the work of the attestation provider just in case.

If you use TNF as your attestation provider, we have custom tools that enable us to create Merkle Trees from CLEs within minutes. We can either invite you to our GUI application or you can use the source code available here to re-create the Merkle Tree.

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