What is Proof of reserves?
An attempt by a custodian to demonstrate cryptographically that it holds the bitcoin it claims to hold.
A meaningful proof has two halves: proof of assets (control of addresses holding coins) and proof of liabilities (what is owed to customers). The second is far harder and is often omitted.
Assets alone prove nothing about solvency, because liabilities are unbounded. Treat an assets-only attestation as marketing rather than an audit.
Proving control of a wallet is not proving solvency. Without verified liabilities the figure is one side of a balance sheet.
Related terms
Exchange
A venue matching buyers and sellers. Most are custodial: balances shown are database entries, not coins you…
Keys & custodyCustodial
An arrangement where a third party holds the keys and you hold a claim against them.
EconomicsCounterparty risk
The risk that the other side of an arrangement fails to deliver — an exchange, a custodian, a lender.
This definition is part of the Bitcoin Logical glossary. For the fuller explanation, start with Learn, or see the live numbers on The Bitcoin Signal.