Proof of reserves

Most PoR schemes use a Merkle tree: each customer can verify their own balance was included in the snapshot without seeing everyone else's balances, and the exchange publishes on-chain wallet addresses that should hold at least as much as the sum of customer balances.

As a simplified example, if an exchange reports $500,000,000 in customer liabilities and its published wallets hold $520,000,000 of the matching assets, reserves cover about 104% of liabilities at that snapshot — a healthy margin, computed straightforwardly as assets divided by liabilities.

A common mistake is treating a single PoR snapshot as an ongoing guarantee. It proves solvency at one point in time, not that the exchange will still be solvent next week, and it typically says nothing about the exchange's liabilities beyond customer crypto balances (like debt).