Ethereum “proof of reserves” and “Evidence of the liabilities” understand: a beginner guideline
As the second largest cryptocurrency after market capitalization, Ethereum is a complex and fascinating space. Two key concepts that are often discussed in the context of Ethereum are “evidence of reserves” (POR) and “proof of liabilities” (pole). While these terms do not appear to be familiar to the newcomers, it can help them understand the interior of the Ethereum network.
What is a short way of describing what proof of reserves and the proof of liabilities mean?
In simple words, the detection of reserves refers to a mechanism that is a certain amount of ether (Eth), the native cryptocurrency of the Ethereum network on which blockchain is available. This is done by checking that a certain amount of ETH was “saved” or “reserved” in a certain wallet or a certain account. Essentially, it is like an insurance policy for your Ethereum stocks.
On the other hand, the proof of the liabilities refers to a mechanism that ensures that a certain ether is available on the blockchain if this is not already the case. This usually happens by checking that a certain amount of ETH “awarded” or another entity or another wallet has been “owed”. In this case, it is as if you have a backup plan for your Ethereum stocks.
What are your differences?
The main difference between the detection of reserves and the proof of liabilities is the purpose of which you meet:
* Evidence of reserves (POR) : This mechanism is used to ensure that there is a certain amount of ETH on the blockchain. It’s like an insurance policy for your Ethereum stocks.
* Evidence of liabilities (pol) : This mechanism is used to ensure that a certain amount of ETH is available if it is not yet. It is like he has a backup plan for your Ethereum stocks.
Is it done by an auditor?
The test process is crucial for ensuring the integrity of the Ethereum network and the review of whether POR or POL mechanisms work correctly. The auditors, often independent third-party companies, make sure that the Ethereum blockchain corresponds to certain standards and requirements before granting permission for a new intelligent contract.
Is it done manually or automatically?
POR is typically implemented manually by validators that check ETH’s existence on the blockchain using complex mathematical algorithms. In contrast, pole is often automatically implemented by a system called “Liquidations”, which ensures that there is a certain amount of ETH in an emergency (e.g. if there is high demand for it).
In summary, the detection of reserves and proof of liabilities is two different mechanisms that ensure the integrity of the Ethereum network. While POR is used to check ETH’s existence on the blockchain, POL is used to ensure availability in an emergency. Understanding these concepts can help you to better capture the internal functioning of the Ethereum network and to make well -founded decisions about your investments.
Additional resources:
- White paper from Ethereum: “Ethereum: A scalable, decentralized application platform”
- Ethercan: A comprehensive platform for researching and analyzing Ethereum transactions
- Coindesk: A leading cryptocurrency news agency with detailed reporting on the Ethereum network