Fund Security and Proof of Reserves: On-Chain Verification, Hot and Cold Wallets and Negative Balance Protection
How does MC Markets keep your funds safe? On-chain proof of reserves, wallet security and the protections on your account.
When you keep money on a platform, only one question really matters: is the money actually there? Has the platform used it for something else? And if something goes wrong, can you get it back?
This article answers those questions one by one.
1. On-Chain Proof of Reserves: Cryptographic Proof That the Money Is There
MC Markets' proof of reserves is deployed on the Arbitrum chain. It uses two independent cryptographic techniques to show everyone that, on the verification date of each report, the assets the platform holds are enough to cover the balances of all users.
Merkle tree
Think of it as a "balance tree". The platform arranges the asset balances of all users into a tree structure. Every user can find their own place in the tree and verify that their balance has been included, without seeing any information about other users.
Here is the idea behind it. Each leaf of the tree stands for one user's balance, but the tree does not store the balance itself. It stores a hash calculated from it, which you can think of as a fingerprint of the data. Two neighbouring nodes are combined and hashed again, level by level, until a single root is left at the top. To verify, you start from your own balance and the hashes of the neighbouring nodes along your path and work your way up. If the root you arrive at matches the one in the proof of reserves, your balance has been counted. Other users appear in the tree only as hashes, so their balances cannot be seen.
zk-SNARK zero-knowledge proof
This technique solves a different problem: how to prove that the tree adds up correctly, and that the assets the platform holds are no less than the sum of all user balances, without revealing any specific data.
The circuits that generate the proof have been audited by the independent audit firm OtterSec.
On the Proof of Reserves page (More → Proof of Reserves in the top navigation) you can see:
- The verification date
- The reserve ratio
- The total value of user assets
- The total value of platform reserves
To verify it yourself, log in, find your record ID in the Proof of Reserves Report on the Proof of Reserves page, download the Merkle file and the verification tool, put them in the same folder and run the tool.
The platform's wallet addresses are public: on the Proof of Reserves page, click View Address List, and each address opens in the block explorer of its chain so you can check it on-chain yourself. DeFi assets, including Uniswap V3 liquidity positions, are also included in the reserve calculation.
2. Hot and Cold Wallets: Most of the Money Stays Offline
| Type | What it does |
|---|---|
| Hot wallet | Handles everyday deposits, withdrawals and other instant transaction needs |
| Cold wallet | Most user assets are stored offline under multi-signature, and every movement needs authorization from multiple parties |
The hot wallet is connected to the internet, so you can deposit and withdraw whenever you like. The cold wallet is offline. Most assets are kept there, and every movement needs authorization from several parties before it can happen. So even if something goes wrong with the hot wallet, most of the funds stay safe.
3. Negative Balance Protection for Retail Clients: You Won't Owe the Platform After an Extreme Move
This one matters most if you are new.
If an extreme market move pushes your account equity below zero, MC Markets bears the loss beyond your balance:
- The system resets the negative balance to zero
- You don't owe the platform anything
- MC Markets charges no liquidation fee
In other words, in the worst case you lose the money in your account, and you never end up owing more.
Negative balance protection is one of the retail client protections. If you apply to upgrade to a professional client, you give up retail client protections, including negative balance protection and the statutory leverage limits. See Margin and Leverage for details.
4. Segregation: Your Money and the Platform's Money Are Kept Apart
| Measure | What it means |
|---|---|
| Separate accounts | Your Perps, Spot and Earn accounts are each independent and don't affect one another |
| Client funds kept apart from platform funds | Client funds are managed separately from the platform's operating funds |
| Vault isolation | User Vault funds run in a separate vault trading account, apart from your own Spot and Perps accounts |
Your money sits in your own accounts, the platform's money sits in the platform's accounts, and the two are not mixed.
5. Account Security Features
The platform gives you these layers of protection:
- 2FA protects sensitive actions such as adding a withdrawal address, withdrawing to a new address and internal transfers (see Account Security Settings)
- Withdrawal address management
- A 24-hour security cooldown after any 2FA change
- A fund password that you set
We recommend using all of them. 2FA and withdrawal address management in particular stop most common account-takeover attempts.
It's best to save the withdrawal addresses you use often under Withdrawal address management in advance, and to save only addresses you control. A saved address needs no further 2FA when you withdraw, while a new address needs verification every time. Also, for 24 hours after a 2FA change you cannot add new withdrawal addresses.
6. Regulation
Retail clients covered by the relevant regulations are subject to statutory leverage limits (see Margin and Leverage).
Restricted regions: Canada, Cuba, Iran, Iraq, Myanmar, North Korea, Sudan, Syria, Turkey and the United States.
7. Avoiding Scams: Four Things MC Markets Will Never Do
MC Markets will never:
- Ask for your private key, seed phrase, login password or verification code
- Ask you to transfer funds to a personal wallet address
- Contact you by private message to sell products or services
- Promise fixed returns, zero risk, or that the value of USDC or fiat currency will never change
If anyone does any of these things in the name of MC Markets, it is a scam. Verify it through official channels straight away, or email cs@mcmarkets.com to check.
About the mobile app: Download information for the app is published only through official channels. Don't install any app from an unknown source that claims to be the official MC Markets app.
Official channels: the current official website, the official Telegram (@mcmarketsglobal) and the official X account (@mcmarketsX).
8. What You Should Do Yourself
Finally, please make sure you do these things too:
- Turn on 2FA (see Account Security Settings)
- Set a fund password
- Save only addresses you control under Withdrawal address management
- Never share your private key, seed phrase, passwords or verification codes with anyone
- Check the proof of reserves results regularly
Security is shared between the platform and its users. The platform has done its part; please don't skip these last few steps.
Further Reading
- Account Security Settings: 2FA, Your Backup Key, Fund Password and Avoiding Scams
- How to Verify MC Markets' Reserves Yourself? A Hands-On Merkle Tree and Arbiscan Guide
- Margin and Leverage: Tiered Leverage, Liquidation and Leverage Limits by Market
- Account Structure and Fund Transfers: Moving Funds Between Spot and Perps, and Subscribing to Earn and User Vaults
Risk Warning
Figures such as the reserve ratio are those in the latest report on the Proof of Reserves page. Negative balance protection applies to retail clients, and upgrading to a professional client means giving it up. The platform's security measures cannot replace your own care: never share your private key, seed phrase, passwords or verification codes with anyone. Trading digital assets involves high risk. Only use funds you can afford to lose.
Disclaimer
This article is for general informational and educational purposes only and may not apply to the regulations or products available in your region. It does not constitute investment, financial, or trading advice of any kind, nor an offer, solicitation, or recommendation to buy, sell, or hold any digital asset.
Trading digital assets involves high risk, prices can be extremely volatile, and you may lose all of your invested capital. Leveraged trading can result in losses exceeding your initial deposit. Past performance is not indicative of, and does not guarantee, future results.
You should make investment decisions independently based on your own financial situation and risk tolerance, and consult a licensed professional adviser where necessary. While we strive to ensure the accuracy of the information in this article, MC Markets accepts no liability for any errors or omissions, or for any loss you may suffer from using or relying on this information.
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