The concept of Proof of Reserves started after the implosion of Mt Gox. Initially, only Exchanges were applicable to execute a Proof of Reserves. However, the application of Proof of Reserves has expanded to stablecoins, asset-backed tokens, ETFs and more.

Like cash, digital assets are typically “bearer” assets, meaning the asset confers ownership to whoever physically “holds” the asset. However, digital assets are well… digital, so how can we prove a party “holds” it? How can we fulfill our assertion of Rights & Obligations in the context of a financial statement audit?