What is a brief way of describing what proof of reserves and proof of liabilities mean?
What is their difference?
I have searched and read but I haven't got it yet.
Is it done by an auditor? Is it an audit?
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What do you mean by "in 2-lines"? Are you looking for an answer that is only 2 lines long? – Jestin Jun 14 '16 at 19:45
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Yes! I am sorry. I was trying to say that I wanted a brief explanation – elli Jun 14 '16 at 20:26
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I updated your question for clarity. Keep in mind that not all answers can be kept short, especially if you want them to be correct :) – Jestin Jun 14 '16 at 20:34
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Ok! Then I dont mind having a no-brief exaplanation :) – elli Jun 14 '16 at 20:36
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Proof of reserves: This is proof that you actually control at least a particular amount of particular assets.
Proof of liabilities: The is proof that you do not owe more than a particular amount of particular assets.
So, for example, if an exchange can prove that it has reserves of 15,000 Bitcoins and that its owes its customers no more than 14,500 Bitcoins, then it has proven that its Bitcoin holdings are solvent.
David Schwartz
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@elenaa They can have slightly different implications, but their meanings overlap. For example, if you wanted to borrow my car and I wanted to be sure you could pay for any damage you might do to my car, I might demand a proof of assets. But that wouldn't be a proof of reserves because no obligation currently exists to reserve funds to meet. Reserves are assets reserved to cover specific liabilities. – David Schwartz Jun 17 '16 at 20:04