The integration of Chainlink Proof of Reserve (PoR) is something that Backed is happy to announce. With this feature, users can now verify the collateral of the tokenized assets in a transparent and trust-minimized manner.
Users can rest assured that their investments are properly covered thanks to the implementation of Backed. With PoR, users can now independently confirm the adequacy of collateral reserves in the chain at any time. To maintain the integrity of tokenized assets, this is essential.
How the Proof of Reserves solution works
Once we get the money from a user who buys bTokens, we immediately acquire the underlying asset as collateral. We instruct our broker to buy the underlying asset. The user then receives the tokens from us. This entire procedure usually takes a few minutes, although we always strive to improve its efficiency.
The operator of our audit API is the network company. They can see the balances of our bank accounts at all times and have read-only access to them. They refresh the API data every ten minutes.
Because it takes several days for the securities to be credited to our bank account, in-transit securities are also considered a separate data point. We provide internal transaction data to the network firm, which ensures that the underlying assets are in transit to our Swiss custodian.
Chainlink Proof of Reserve’s decentralized oracle network then verifies this aggregated data. The statistics sent by Chainlink PoR are updated daily, or more often if the size of the reserves fluctuates by more than 10%.
Our proof of reserves solution for our most popular products is based on this data. The amount of collateral we have acquired and held is publicly disclosed on our website and can be accessed on-chain.
“When we first founded Backed, we knew how important it would be to have verifiable, on-chain, transparent data that showed our assets were fully collateralized. Integrating Chainlink Proof of Reserve is an important milestone in achieving the company’s goal of creating products that are proven to be 1:1 supported and fully composable.” – Adam Levi, co-founder
Why is Proof of Reserves (PoR) crucial?
Never before has demonstrating good asset collateral been so crucial. By providing transparent, independently verifiable data that is regularly updated and accessible on-chain, we aim to earn your trust. Thanks to the data provided, users can be sure that the number of bTokens corresponds to the number of underlying assets they own.
As required by Swiss law, we already undergo routine audits. With this new advancement, the data is now publicly available and the frequency of data points has increased significantly. Because of the increased utility that comes from putting the data on chain, third parties using our products can create their own mechanisms to prove the legitimacy of their business practices.
What is the mechanism of Chainlink Proof of Reserve (PoR)?
The information needed to determine the appropriate collateral of on-chain assets backed by off-chain reserves is sent to smart contracts via Chainlink POR.
Chainlink Proof of Reserve, which is managed by a decentralized network of oracles, enables the autonomous real-time verification of collateral and helps protect user funds from fraudulent behavior and unexpected fractional reserve practices.
Chainlink PoR is used for automated on-chain verification that provides users with better assurance about an asset’s underlying collateral and increases the level of transparency around asset collateral, rather than users having to rely solely on paper guarantees.
Meaning of tracking effects in transit
Tracking conventional financial assets before they reach our custodian accounts is one of the more difficult aspects of this integration. Conventional financial assets may take two to three days to arrive. There are problems with transferring conventional money to cryptocurrency rails that require special solutions.
We provide The Network Firm and Chainlink with access to our internal transaction data through an API, strengthening the assurance that our tokens are collateralized even while the underlying assets are transferred from our broker to our custodian. Users can rest easy knowing that their bTokens will therefore always be supported 1:1.
Click here to view our Proof of Reserves dashboard.
