- Chainlink’s Proof of Reserve (PoR) solution addresses the demand for transparency in spot Bitcoin and Ethereum ETFs, ensuring reserves are fully collateralized.
- Chainlink’s PoR solution offers key advantages like automated on-chain logic based on ETF collateralization.
Amid the growing demand for spot Bitcoin and Ethereum ETFs, investors are calling for greater transparency into the backing of these assets. Decentralized Oracle network Chainlink is stepping up to address this need with its Proof of Reserve (PoR) solution. Major asset managers and crypto ETF issuers have already integrated this solution.
Chainlink’s PoR Solution Enters Crypto ETF Market
In a post on X, Chainlink noted, “The approval of spot Bitcoin and Ethereum ETFs this year highlights the need for crypto ETF issuers to bring reserves data on-chain in a secure & reliable manner.” Moreover, Asset manager ARK Invest and crypto ETP issuer 21Shares have already taken steps to enhance reserves transparency.
The solution allows the tracking of ARK’s Bitcoin ETF (ARKB) and 21Shares’ Ethereum ETF (CETH) by integrating Chainlink’s PoR solution. According to Chainlink, “These integrations enable clear visibility into the reserves backing these ETF products.” This ensures that the assets underpinning these ETFs are fully collateralized, providing peace of mind for investors.
Moreover, beyond crypto ETFs, 21.co, the parent company of 21Shares, has integrated Chainlink PoR for its wrapped Bitcoin product, 21BTC, on Ethereum and Solana, per the CNF report. Chainlink explained that the integration “provides reliable monitoring of reserves and enables a secure minting function for 21BTC.”
The approval of spot Bitcoin and Ethereum ETFs this year highlights the need for crypto ETF issuers to bring reserves data onchain in a secure & reliable manner.
How #Chainlink Proof of Reserve (PoR) supports the transparency and adoption of crypto ETFs 🧵
— Chainlink (@chainlink) September 24, 2024
Key Benefits of Proof-of-Reserve
Chainlink’s PoR solution offers several important advantages for crypto ETF issuers. First and foremost, it enables programmability. Hence, it triggers automated on-chain logic based on changes in ETF collateralization. This feature streamlines the management of reserve-backed assets, reported CNF.
Additionally, the system is highly “decentralized,” relying on security-reviewed, Sybil-resistant, and decentralized node operators to ensure the integrity of reserve data. Another major benefit is “transparency.”
Chainlink’s PoR allows near real-time monitoring of reserves. Thus, it offers issuers and investors a clear and transparent picture of the assets backing their ETFs. As Chainlink put it, “Using Chainlink PoR for reserves transparency is critical—it helps connect off-chain and on-chain markets through programmability and transparency.”
Moreover, the rise of on-chain finance offers a way to reduce financial market fragmentation, making markets more liquid, efficient, and transparent. The Oracle services provider argues that its PoR enhances connectivity between off-chain and on-chain environments. Moreover, Chainlink’s PoR system also mitigates risk by automating verifications and publishing auditor-verified reports on-chain.
These steps help prevent systemic failures and protect users from unexpected fractional reserve activity. As Chainlink emphasized, “Prove on-chain and off-chain collateral reserves to help mitigate risk and protect users.”
Recently, Chainlink unlocked a total of 18.75 Million LINK to crypto exchange Binance, reported CNF. In the last 24 hours, the LINK price has gained more than 7% currently trading at $12.26 with a market cap of $7.6 billion. On the weekly chart, the LINK price is up by 17.5%.
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