Harvey Liu, cofounder and CEO of LeveX, says proof of reserves is a static monthly or quarterly snapshot that cannot reveal bank loans or debts.
LeveX uses a Merkle tree to show total platform assets without publishing user IDs, so each user can verify their own balance.
Liu admits LeveX should have invested more in technology and product early, because Binance built its public square first with greater resources.
What a crypto exchange's proof of reserves still hides
Proof of reserves builds trust in a crypto exchange but proves less than users assume. It shows holdings at one announced moment, says nothing about off-chain debts, and is only as good as the assets it contains. Harvey Liu, running a small offshore exchange against much larger rivals, explains how verification can be made more meaningful and where its limits remain.
Takeaways
Proof of reserves is only a snapshot. Exchanges take reserve snapshots monthly or quarterly and announce the timing in advance, so a report proves holdings at one moment only. It also cannot show bank loans or other real-world debts a company owes.
Reserve quality matters as much as size. Liu says reserves mean little unless they hold quality assets. He names Bitcoin, Ethereum, Solana and USDT as the best, and warns users to be wary when a platform's own token makes up a large share.
Labeled wallets expose last-minute window dressing. Exchanges can label their wallets on chain. Users can then check whether funds sat there over a longer period or were moved in just before the snapshot, which closes part of the gap a static report leaves.
Merkle trees let users verify their own balance. LeveX publishes total platform assets through a Merkle tree without exposing user IDs, so each user can find their account and confirm its balance. Snapshot data goes to an intermediate server so verification does not load the trading system.
Small teams lose product races to giants. LeveX had a public square idea in 2022, but Binance, with more developers and money, shipped Binance Square first. Liu says LeveX should have invested more in technology early. Redundancy and spare server capacity kept it online during last year's crash.
Offshore registration defines where LeveX can operate. LeveX is registered in Panama, advertises only in English, and blocks the US, UK, Singapore and mainland China. It is seeking MiCA authorisation for Europe and a VARA licence for the Gulf before considering localised markets.
AI strengthens both exchanges and their attackers. LeveX builds AI agents for placing trades and AI coin analysis, and uses AI internally for coding and audits. Liu warns AI is cracking old platform bugs for hackers, and that AI plus quantum computing could eventually threaten Bitcoin private keys.
LeveX's roadmap and view of DeFi
Liu sees decentralized exchanges as a valuable complement to centralized ones and points to Hyperliquid's success as a model others are following.
LeveX may launch a similar decentralized project later and may take part in DeFi as an investor.
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On this episode 2
Show 1
Its own public square feature, its answer to Binance Square, is expected this quarter, with gamified tournaments as a near-term focus.
For 2027 it plans a social square where top KOLs share content and public trading tournaments with generous prizes.
Social copy trading, letting users follow top traders on the platform, is also slated for 2027.