Gate Says Cold Storage Covers 104.58% After $6.3B Binance Hack

Gate launched a security framework it calls Proof of Security, or PoSEC, on 5 November, a week after attackers took roughly $6.3 billion from Binance's hot wallets, and published a first snapshot of its own storage: a cold storage coverage ratio of 104.58%.

For anyone holding coins on an exchange, the coverage ratio is the part worth understanding. A hot wallet stays connected to the internet, and it is what gets emptied in a breach; cold storage is kept offline. Gate's argument is that when cold storage holds at least 100% of what customers own, an attacker can drain the entire hot wallet and every customer balance is still covered.

The snapshot, taken at 00:00 UTC on 4 November, puts 88.26% of Gate's total assets in cold storage and 11.74% in hot wallets, according to Gate's own announcement. The exchange says PoSEC is the first framework of its kind among digital asset trading platforms.

"The test is simple arithmetic anyone can check: if cold storage assets are at or above 100% of user assets, then losing the entire hot wallet still leaves users covered," founder and CEO Lin Han told CoinDesk. Gate says its hot wallet exposure is covered by excess reserves, the assets it holds above what customers own.

What PoSEC Adds to Proof of Reserves

Most large exchanges already publish proof of reserves, which shows the assets exist. Han's point is that this does not say where they are kept or who controls them: "Proof of Reserves (PoR) shows the assets exist, and PoSEC shows how they're stored and whether they're protected," he said.

Gate is not new to the format. It says it was among the first platforms to publish an open-source proof of reserves system, in 2020, using Merkle trees for asset verification before adding zk-SNARKs. Its latest reported reserves, as of 18 October, totalled about $8.688 billion, or 118.49% of customer assets.

Some of the cold storage is not crypto. Gate says part of it is held in stocks and US Treasuries under independent custody. The PoSEC figures, the 104.58% ratio included, are going through an independent audit that covers asset authenticity and control, valuation methods and the coverage ratio calculation. Gate has not named the auditor or said when the review will be published.

Gate Wants Rivals to Adopt the Same Rules

A storage standard only means something if more than one exchange measures the same way. Gate says it is publishing the PoSEC methodology so rival platforms can adopt something similar, and Han has called for an industry-wide security alliance to coordinate responses to incidents. He has also floated a "Vault" system built on multi-party computation, or MPC, with withdrawal delays.

The Binance Hack Behind the Timing

Attackers took approximately $6.3 billion from Binance's hot wallets on 29 October, the largest recorded theft in crypto, attributed to a group linked to North Korea. Binance said it set aside about $6.34 billion of company funds to cover users' losses, and has since said it covered the theft without taking loans or selling assets.

The outflows followed quickly. Binance said it processed about $4.6 billion in withdrawals and $1 billion in deposits by Sunday afternoon, a net outflow of roughly $3.6 billion, or 2.1% of its $171 billion in total assets. Those are the exchange's own figures, and the size of the theft is given as both $6.3 billion and $6.34 billion in the reports, a gap no single page has reconciled.

What a Coverage Ratio Does Not Prove

Every Gate figure here is the exchange's own accounting of itself, at one moment in time. A coverage ratio shows that assets exist and where they sit; it is not a test of how quickly cold storage can settle customer withdrawals under pressure. Cold storage is held offline, which makes it slower to move than a hot wallet, and Han's own Vault design includes withdrawal delays.

The next dated marker is the audit. Until an auditor puts its name to the 104.58%, that number is a claim by the exchange that produced it.