#GateLaunchesPoSECProofOfSecurity

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GATE LAUNCHES POSEC: A NEW WAY TO MEASURE EXCHANGE SECURITY, WITH 104.58% COLD STORAGE COVERAGE

Imagine waking up one morning and discovering that an exchange has suffered a serious security breach involving its online wallets. The first question that comes to mind is simple: Are customer assets still protected, and does the platform have enough securely stored funds to cover them?

This is an important question for anyone who uses a digital asset exchange. Having enough reserves is one part of security, but knowing how those reserves are stored is equally important. Gate has introduced a new framework called Proof of Security (PoSEC) to address this second question and provide greater visibility into its asset protection structure.

A NEW STANDAR
On November 5, 2026, Gate officially introduced Proof of Security, known as PoSEC. The framework focuses on how platform assets are stored and whether cold storage alone can cover all user assets under an extreme scenario in which the entire hot wallet balance is lost.

This introduces an additional way to examine exchange security. Instead of looking only at whether an exchange holds enough assets, users can also examine how those assets are distributed between online wallets and offline storage.

The main idea is straightforward: security should not only be about the amount of assets an exchange holds. It should also consider where those assets are kept and how much protection remains if an important part of its infrastructure is compromised.

POR VS POSEC

To understand why this development matters, it is important to understand the difference between Proof of Reserves (PoR) and Proof of Security (PoSEC).

Proof of Reserves focuses on whether a platform holds enough assets to cover its customer balances. It helps users understand whether the exchange has sufficient reserves to meet its obligations.

PoSEC adds another dimension by examining the storage structure of those assets. It focuses on the amount held in cold storage compared with total user assets.

Think of it this way:

POR ASKS: DOES THE EXCHANGE HAVE ENOUGH ASSETS TO COVER CUSTOMER BALANCES

PoSEC asks: If all online wallet assets were lost, would the assets in cold storage still be enough to cover customer balances?

These two approaches serve different but complementary purposes. Together, they provide a broader picture of reserve adequacy and asset storage security.

COLD STORAGE EXPLAINED

Cold storage refers to keeping digital assets offline rather than continuously connected to the internet.

This reduces direct exposure to online attacks because the private keys controlling these assets are not kept in ordinary internet-connected wallet systems.

Hot wallets, on the other hand, are connected to online systems and are commonly used for everyday operations, including customer deposits and withdrawals.

Both types of storage have important roles.

Hot wallets support convenient transactions and help an exchange process everyday activity. Cold storage provides an additional layer of protection by keeping a larger portion of assets away from routine online operations.

The challenge is finding the right balance between accessibility and security. An exchange needs to process withdrawals efficiently while also protecting assets against potential security incidents.

PoSEC aims to make this balance more visible through measurable information.

104.58% COVERAGE

One of the most important figures in Gate's initial PoSEC disclosure is its reported cold storage coverage ratio of 104.58%.

The published storage snapshot is dated November 4, 2026, at 00:00 UTC.

Gate reported the following asset distribution:

COLD STORAGE: 88.26%

HOT WALLETS: 11.74%

USER ASSETS: 84.39% OF THE REPORTED RESERVE STRUCTURE

PLATFORM-OWNED ASSETS: 15.61% OF THE REPORTED RESERVE STRUCTURE

The reported cold storage coverage ratio compares the cold storage share with the user asset share. Based on these figures, Gate reports a coverage ratio of 104.58%.

WHAT DOES THIS NUMBER MEAN?

A ratio above 100% indicates that the reported cold storage amount is sufficient to cover the reported user asset share under the calculation methodology used.

In simple terms, the framework is designed to demonstrate that even if the assets held in hot wallets were completely lost, the reported cold storage coverage would still be sufficient to cover user assets.

This is an important distinction because the framework focuses on an extreme-risk scenario rather than ordinary daily operations.

THE PROS

There are several potential benefits to this approach.

First, it provides additional transparency. Users can examine the distribution of assets instead of relying only on a reserve coverage figure.

Second, it introduces a clear security measurement. A cold storage coverage ratio above 100% gives users a straightforward benchmark for understanding the reported level of protection.

Third, it encourages better industry practices. If exchanges begin publishing comparable information about their storage structures, customers may have more information when evaluating the security arrangements of different platforms.

Fourth, PoSEC complements existing reserve verification methods. Proof of Reserves and Proof of Security examine different aspects of asset protection, making their combined use more informative than relying on only one measurement.

Finally, the framework gives users a practical way to think about extreme security risks. Rather than focusing entirely on whether a platform has enough assets today, it also raises the question of how much protection remains if its online wallet infrastructure experiences a major failure.

For an industry where trust and transparency are essential, these are meaningful areas of improvement.

THE LIMITATIONS

However, a new security framework should not automatically be treated as a guarantee that every possible risk has been eliminated.

There are important limitations that users should understand.

First, a cold storage coverage ratio does not prove that an exchange is completely protected against cyberattacks. It measures a particular aspect of asset security, not every possible weakness in an exchange's technology, operations or internal controls.

Second, cold storage does not mean that assets can never be accessed or compromised. Security also depends on private-key management, authorization procedures, operational controls and the people responsible for managing those systems.

Third, keeping assets offline can create operational challenges. Exchanges still need to process withdrawals, deposits and other transactions. Moving assets between storage systems requires careful authorization and management.

Fourth, a high coverage percentage should not be confused with a guarantee of immediate withdrawals under every possible emergency scenario. Asset coverage and operational availability are two different things.

These distinctions matter because security is not a single number. It is a combination of technology, procedures, independent verification and responsible management.

AN IMPORTANT DETAIL

There is another point worth examining in Gate's initial disclosure.

The reserve structure and storage structure use snapshots taken at different times. The published comparison is based on asset shares rather than a fully reconciled valuation of both structures at one identical timestamp. Price movements and asset flows between the snapshots are not included in that comparison.

This does not automatically invalidate the reported figure, but it is an important methodological detail.

For users evaluating the 104.58% ratio, understanding how the percentage is calculated is just as important as looking at the final number.

A common-time comparison, together with clear valuation methods and independent verification, would provide additional confidence when assessing the relationship between cold storage assets and customer liabilities.

Transparency is most useful when people can understand not only the result but also the assumptions behind it.

INDEPENDENT VERIFICATION

Gate has stated that the current PoSEC data is undergoing verification by an independent third-party audit firm.

The planned review covers three important areas:

Asset authenticity and control: Checking whether the reported assets actually exist and are controlled by Gate.

Valuation and reporting methodology: Reviewing how assets are valued, classified and included in the calculations.

Coverage calculations: Examining whether the reported cold storage coverage ratio has been calculated correctly.

The independent verification is still in progress, and the audit report is expected to be published after completion.

This is an important stage because publicly reporting a security metric and having its underlying information independently checked are two different things.

The completed review will be an important part of evaluating the credibility of the initial disclosure.

FINAL THOUGHTS

For the wider digital asset industry, the introduction of PoSEC raises an important question about what users should expect from a secure exchange.

It is no longer enough to discuss only how much an exchange holds. How those assets are stored, how they are protected and whether the reported figures can be independently verified also deserve attention.

Gate has taken a step toward making these details more visible through its new framework. The next important milestone will be the completion of independent verification and the continued development of transparent security reporting.

At the end of the day, trust is built through clear information, measurable safeguards and consistent accountability.

Do you think PoSEC could encourage other exchanges to make their cold storage coverage equally transparent?

Shorten this for social reading
Clarify the 104.58% calculation

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