Leading fintech innovator, Backed, announced on October 26 its recent integration of Chainlink (LINK) Proof of Reserve (PoR).
This strategic move offers its users a transparent and trust-minimized mechanism to validate the collateralization of their tokenized assets with the integration as well as signifying a monumental leap in reinforcing user trust.
With PoR, Backed’s users now have the capability to independently and on-chain confirm the sufficiency of collateral reserves at any given time. A necessity in ensuring the integrity of tokenized assets, as per the latest information shared with Finvold.
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Behind the curtains of Backed’s Proof of Reserves solution
Whenever users purchase bTokens from Backed, the company swiftly engages in acquiring the corresponding underlying asset as collateral. This sequence involves transmitting an acquisition order for the underlying asset to their broker.
Subsequently, the tokens get issued to the user. Impressively, this streamlined process often concludes within minutes and Backed remains steadfast in its dedication to further enhance its efficiency.
The auditing prowess is driven by The Network Firm, which manages the auditing API. This entity has been granted read-only rights to the custody bank accounts of Backed, which allows them to perpetually monitor account balances and update API data at an impressive 10-minute interval.
Furthermore, in-transit securities are meticulously recorded as distinct data, considering the natural time-lapse required for securities to find their way to the bank account. This holistic internal data, vouching for the incoming assets, is transparently conveyed to Backed’s Swiss custodian.
Chainlink Proof of Reserve’s robust decentralized oracle network then steps in to corroborate this aggregate data. Noteworthy is the fact that Chainlink PoR updates its data daily or whenever there’s a fluctuation of more than 10% in the reserve volume.
Backed makes sure data is accessible on-chain
Backed ensures this consolidated data is accessible both on their official website and on-chain, thereby offering a compelling Proof of Reserves solution for their most sought-after products.
Adam Levi, Co-founder, stated:
“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 facilitates the provision of data to smart contracts, enabling them to accurately determine the level of collateralization for on-chain assets that are supported by off-chain reserves.
What’s more, the system is designed to provide the real-time verification of collateral using a decentralized network of oracles. This system aims to safeguard user money by preventing unexpected fractional reserve practices or fraudulent activities.
Instead of relying only on paper assurances, the Chainlink PoR system is used to enable automated verification on the blockchain. This approach offers consumers an enhanced level of assurance about the collateralization of an asset and fosters more transparency in relation to asset collateralization.
