What are Crypto Reserves and How to know how much is available?

Transparency is a topic that is being highly discussed currently in the crypto market. Several crypto exchanges crashed as they did not properly disclose how many reserves they had. The latest FTX crash, crypto exchanges started to come forward with their reserves disclosure. What are crypto reserves? How to know how much is available in a crypto exchange?

What are Crypto Reserves?

The word “reserve” is very common in the banking world. When people deposit money in the bank, the latter can take those deposits and invest a part of it to make a return. The required reserve varies from country to country, and depends on certain economic factors such as risk, growth, and GDP. If your bank loaned your money to someone else and you come one day to withdraw your money…The bank is in big trouble

In traditional finance, banks are obliged to keep a certain specific reserve in case this scenario happens. However, in the crypto world, it was an “implied” thing to do. Crypto reserves portray the trustworthiness and ability for crypto exchanges to withstand heavy withdrawals. If the money is available, there shouldn’t be any withdrawal problems, hence less chance to go bankrupt.

Who started the idea of “Transparent” Crypto Reserves?

Many crypto exchanges already adopt the concept of crypto reserves. However, following the FTX crash, the CEO of Binance CZ formally announced that they are going to adopt the concept of “transparent” crypto reserves. This allows their users to clearly see on the blockchain the reserves that are parked.