October 29, 2023

Backed Implements Chainlink Proof of Reserves for Enhanced Transparency in Tokenized Assets

Backed, a prominent fintech innovator, made public its recent adoption of Chainlink's Proof of Reserve (PoR).

This strategic decision represents a significant step forward in providing users with a transparent and trust-minimized process to verify the collateralization of their tokenized assets. The integration marks a substantial advancement in bolstering user trust within the platform.

With the incorporation of PoR, Backed's users now possess the capability to independently confirm, on-chain, the sufficiency of collateral reserves at any given moment. This verification is vital in ensuring the integrity of tokenized assets, as detailed in the latest information.

Peering behind the scenes of Backed's Proof of Reserves solution

Upon the purchase of bTokens from Backed, the company promptly initiates the acquisition of the corresponding underlying asset to serve as collateral. This process involves sending an acquisition order for the underlying asset to their broker.

Following this, the tokens are issued to the user. Impressively, this streamlined process typically concludes within minutes, showcasing Backed's commitment to continuously improve its efficiency.

The auditing capability is managed by The Network Firm, responsible for overseeing the auditing API. This entity has been granted read-only access to Backed's custody bank accounts, enabling the continuous monitoring of account balances and updating API data at 10-minute intervals.

Moreover, the records meticulously detail in-transit securities as separate data, accounting for the natural time-lapse involved in the transfer of securities to the bank account. This comprehensive internal data, validating the incoming assets, is transparently relayed to Backed's Swiss custodian.

The robust decentralized oracle network of Chainlink Proof of Reserve then validates this aggregated data. Notably, Chainlink PoR updates its data daily or in the event of a fluctuation of more than 10% in the reserve volume.

Backed's commitment to on-chain data accessibility

Backed ensures that this consolidated data is available both on their official website and on-chain, providing a compelling Proof of Reserves solution for their most sought-after products.

Adam Levi, Co-founder, remarked:

“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.”

The Chainlink PoR mechanism enables the provision of data to smart contracts, enabling accurate determination of the collateralization level for on-chain assets supported by off-chain reserves.

Moreover, the system offers real-time verification of collateral using a decentralized network of oracles. This setup aims to protect user funds by preventing unexpected fractional reserve practices or fraudulent activities.

Rather than relying solely on paper assurances, the Chainlink PoR system facilitates automated verification on the blockchain. This approach provides consumers with increased confidence regarding asset collateralization, fostering greater transparency and assurance.

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