One-minute summary
A verifiable reserve is an amount anyone can check for themselves, without relying only on the word of whoever manages it. It shows how much is in an account at a given moment. By itself, it doesn't show how much the company owes, so a public balance isn't an audit and doesn't prove the company can pay everything it owes.
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Why does a guarantee need a reserve?
Whoever promises to pay in case of default needs to have the funds when payment is due. Without public information, the person buying the guarantee depends on what the company says about those funds. The idea of verifying the reserve is to let that person check for themselves.
How can a reserve be verified?
One way is to hold the funds on a public record network, such as a blockchain. On open networks, according to the US standards institute NIST, "anyone can read the blockchain".1 Anyone with the account address can look up its balance and activity without asking permission.
Not every blockchain works this way. Permissioned networks can restrict reading, so "public" is a feature of the network used, not of the technology itself.2
What doesn't a public balance show?
The balance is only one side of the account. It doesn't answer these questions:
- How much is owed: the balance shows funds, not obligations. Debts recorded off the network don't appear in it.
- Whose money it is: nothing on the network proves, by itself, who controls an account or whether the amount was borrowed.
- What happens next: a check shows one moment. An amount can come in before the check and go out right after.
- How the operation works: a balance says nothing about internal controls or how payments are decided.
Is verifying a reserve the same as auditing?
No. In 2023, the US body that oversees audits, the PCAOB, warned investors about third-party "proof of reserves" reports: these engagements "are not audits" and do not provide "any meaningful assurance" to the public. It also said the procedures "likely do not address the crypto entity's liabilities".3
The warning was aimed at the crypto asset market in the United States, but the logic applies to any reserve: showing assets isn't the same as showing solvency.
What makes a reserve genuinely useful?
A balance gains meaning when it can be compared with the obligation it backs. Some questions help you assess what a company publishes:
- Can you check without the company? Can the data be looked up in an independent source, or only on its website?
- Does the balance come with the obligation? Does the company show how much it would need to have, and how it calculates that?
- Is the history available? Can you see how it has changed over time, or only a snapshot of the day?
- What form are the funds in? Is the amount in a liquid asset, or does something have to be sold to turn it into money?
- Who controls the account? How many people have to approve a movement?
- Is there an independent audit? Does one exist, and what does it cover?
So is publishing a reserve worthwhile?
Yes, as long as you say what it proves and what it doesn't. Transparency narrows the distance between what a company says and what anyone can check. It doesn't replace an audit, regulation or reading the contract. It's one more tool, and it works best alongside the others.
Sources
- NIST IR 8202: Blockchain Technology Overview, NIST, 2018.
- Investor Advisory: Exercise Caution With Third-Party Verification/Proof of Reserve Reports, PCAOB, 2023.
- PCAOB warns about limitations on crypto proof-of-reserve reports, Accounting Today, accessed 6 Nov 2026.
Designer and engineer. Leads MUTAV's technical and product side.
For information only. This is not legal advice for your contract.
