Crypto exchange Gate has introduced a new disclosure framework, Proof of Security (PoSEC), designed to demonstrate that its cold-stored assets would cover customer balances even if all of its hot-wallet assets were lost. In a Nov. 5 announcement, the company reported 104.58% cold-storage coverage, based on a storage snapshot taken at 00:00 UTC on Nov. 4.

However, the published percentage is derived by comparing asset shares drawn from different snapshots, rather than establishing cold assets and customer balances on a single common date. Gate itself discloses that limitation, meaning customers need more than the headline ratio to verify the full-backing claim.

Reserve disclosures became an industry-wide practice after FTX's November 2022 collapse left a multibillion-dollar shortfall in customer funds, with exchanges including Binance, OKX, Kraken, and Coinbase publishing proof-of-reserves reports in the weeks that followed. Such reports have drawn recurring criticism for describing assets more fully than the liabilities they back, which is why the measurement basis behind any headline ratio — Gate's included — is what decides whether customers can verify the claim.

Different Measurement Bases

Gate's PoSEC methodology compares an 88.26% cold-storage share with an 84.39% user-asset share. The remaining shares amount to 11.74% held in hot wallets and 15.61% owned by the platform.

The two figures are built on different bases. Cold storage is measured against the combined cold and hot-wallet assets in the storage snapshot, while user assets are measured against platform reserves in a separate Proof of Reserves (PoR) snapshot. The PoSEC FAQ defines the coverage calculation as the first share divided by the second.

The page explicitly states that the snapshots have different totals and that intervening price changes and fund movements are not reflected in the ratio.

One Ratio, Two Dates

Same-date backing requires aligned balances. Gate's reported percentage instead combines shares computed from different snapshot totals, and the earlier PoR reference is not separately dated in the chart.

This does not establish insolvency or losses. Gate's Oct. 21 disclosure reported roughly $8.7 billion in reserves and $7.3 billion in user net assets as of Oct. 18, with an overall reserve ratio of 118.49%. But the PoSEC chart does not separately date its earlier user-asset reference, and the October dollar totals cannot be combined with the November storage percentages to present a measured dollar buffer.

A direct test of backing after a hot-wallet loss would compare surviving cold assets with customer balances at the same point in time, using compatible valuations and the same reporting perimeter. As published, the disclosure leaves a gap in demonstrating common-date coverage, though it does not indicate either insolvency or customer losses.

Gate's definition of cold storage includes digital assets held in cold wallets as well as traditional assets, such as stocks and US Treasuries, held by independent custodians. The exchange says qualifying assets must sit outside routine deposit and withdrawal operations, be offline or independently custodied, require multiparty transfer authorization, and be verifiable. It also explains that off-chain traditional assets can make reported cold storage exceed the balances visible in blockchain cold wallets. The offline requirement reflects the sector's security logic: hot wallets stay connected to the internet to process withdrawals and have been the entry point in several major exchange breaches.

Verification Still Pending

As of Nov. 5, the PoSEC page lists independent third-party verification as in progress. Gate says the review covers asset authenticity and control, valuation and reporting scope, and the coverage calculation itself.

Gate's PoSEC FAQ states that individual wallet addresses are currently withheld for security reasons, which makes the promised independent report particularly relevant to public scrutiny.

That review should be distinguished from the older audit shown on Gate's Proof of Reserves page, which dates a Hacken implementation assessment to Jan. 3, 2024. Hacken describes that work as examining code, architecture, build processes, and vulnerabilities.

The new framework gives customers a concrete scenario to evaluate. The decisive next evidence would be a common-date reconciliation of cold assets and customer balances, with valuation methods, entity scope, custody restrictions, and asset composition clear enough to assess the claim. A completed review could show how those pieces fit together; a comparison of percentages from different snapshots, on its own, cannot.