That's a good point. The exchange's remaining liabilities outside user deposits are still an unknown. (Or at least can't be verified in a trustless manner.)
Doesn’t that make it borderline worthless?
Correct. There is no on-chain way to prove that my exchange doesn't actually owe some third party a trillion dollars.
It does prove that the exchange is in possession of "liquid" assets matching user deposits, which I don't think is worthless, especially if the userbase is large.
I agree that it's far from a comprehensive proof though. Perhaps exchanges need to stick to the bigger auditors for now.
Yes, but it's probably good enough to fool the average crypto investor.