Gate Launches PoSEC After Biggest Crypto Heist Ever at Binance
With PoSEC, Gate wants to show how well reserves are protected after the major Binance hack. The standard goes beyond Proof of Reserves and also measures cold storage coverage.
Key Takeaways
- Gate is introducing Proof of Security, or PoSEC, to measure whether a crypto exchange can survive a hack of its online wallets without losing customer funds.
- The standard goes beyond Proof of Reserves and also checks whether assets are held in cold storage and therefore stored outside internet-connected trading systems.
- Gate is launching PoSEC after the major crypto heist at Binance and reports 104.58% cold storage coverage and $8.69 billion in reported reserves.
Gate wants to use a new security standard to show whether a crypto exchange can survive a full hack of its online wallets without putting customer funds at risk. The company calls the standard Proof of Security, or PoSEC, and says the timing lines up with the recent wave of security incidents in the industry.
What PoSEC Measures
According to founder and CEO Lin Han, the test is simple: if an exchange's cold storage covers at least 100% of user assets, customers stay protected even if the entire exchange's hot wallet disappears. So PoSEC does not just look at whether a company has enough assets, but also whether those assets are stored outside internet-connected trading systems.
That goes a step beyond Proof of Reserves, which mainly shows that the assets exist. Gate says PoSEC is meant to show how those assets are stored and whether they are protected against a hack. Han does acknowledge that the standard does not answer weaknesses like internal passwords, private key management, or access rights.
Why Gate Is Launching This Now
The announcement comes shortly after the biggest crypto heist ever at Binance. That exchange had previously shown that it had enough crypto on hand to cover customer balances, but part of those assets was still stolen. A few days after the hack, Binance said it had set aside $6.34 billion (€5.6 billion) to cover user funds.
Gate says it had been working on PoSEC for a while, but that the recent hacks made it a logical time to make the standard public. The company says cold storage coverage stands at 104.58%, with 88.26% of total assets offline and 11.74% in hot wallets. Reported reserves came in at $8.69 billion (€7.7 billion), or 118.49% of customer assets. According to Gate, those figures are still being independently verified.
What It Means for Exchanges
Gate wants other exchanges and regulators to consider PoSEC, but Han says it is not a legal requirement yet. For European crypto readers, the key shift is that the debate is moving from simply proving reserves exist to asking how well those reserves are actually protected. In a market where cold storage has long been a basic safeguard, an extra yardstick like this could make differences between exchanges easier to see.
Han also said that some cold storage assets consist of shares and U.S. Treasury bonds held under independent custody. At the same time, he said there is still a tradeoff between security and fast withdrawals. PoSEC does not remove that tradeoff, but it should make it easier to measure.
Earlier, the Binance hack on reserve wallets showed that proving reserves exist is not enough if the storage setup itself turns out to be vulnerable. That is exactly the gap Gate wants to close with PoSEC.