Backed is pleased to announce that they have integrated Chainlink Proof of Reserve (PoR).
This development provides users “with a transparent and trust-minimized means to confirm the collateralization of our tokenized assets.”
Backed’s implementation represents a significant step forward in “how users can gain assurance that their assets are appropriately collateralized.”
PoR introduces a way for users “to independently verify the adequacy of collateral reserves on-chain at any time.” This is crucial for “maintaining the integrity of tokenized assets.”
As explained in a blog post, here’s how the proof of reserves solution works:
- When a user buys bTokens, we automatically purchase the underlying asset as collateral once we receive the funds. We send an order to buy the underlying asset to our broker. We then issue the tokens to the user. In most cases this whole process takes minutes – and we strive to make it even more efficient.
- The Network Firm operates our attestation API. They have read-only access to our custody bank accounts and can constantly read our account balances. They update the API data every 10 minutes.
- In-transit assets are also taken into account as a separate data point, as it takes a few days for securities to settle in our bank account. The Network Firm reads internal transaction data from us which guarantees the underlying assets are in transit to our Swiss custodian.
- This combined information is then verified by Chainlink Proof of Reserve’s decentralized oracle network. The figures relayed by Chainlink PoR are updated daily, or if the volume of the reserves changes by more than 10%.
- This data forms our proof of reserves solution for our most popular products. The amount of collateral we have purchased and hold is publicly displayed on our website and available on-chain.
Adam Levi, Co-founder, said:
“When we first set up Backed, we knew how important it would be to have verifiable, on-chain, transparent data that proved our assets were fully collateralized. Integrating Chainlink Proof of Reserve is a major milestone in achieving the company’s goal of creating products that are verifiably backed 1:1 and fully composable.”
According to the update, proof of reserves is important, because:
Proving legitimate asset collateralization “has never been more important. We want to be trusted through transparency, providing independently verified data that is consistently updated and available on-chain. By providing this data, users can be confident that the amount of bTokens will be equal to the amount of the underlying asset held.”
Chainlink PoR provides smart contracts “with the data needed to calculate the true collateralization of any on-chain asset backed by off-chain reserves.”
Operated by a decentralized network of oracles, Chainlink Proof of Reserve enables the autonomous verification of collateral in real-time, “helping ensure user funds are protected from unforeseen fractional reserve practices or fraudulent activity.”
Rather than forcing users to trust paper guarantees, Chainlink PoR is deployed “for automated on-chain verification that gives users a superior guarantee of an asset’s underlying collateralization and generates a higher degree of transparency around asset collateralization.”
