As a seasoned researcher with a keen interest in the cryptocurrency landscape, I find myself intrigued by Justin Sun’s request for Coinbase Global Inc to publish its Proof-of-Reserve (PoR) report. My personal experience has taught me that transparency is a cornerstone of trust in any financial system, especially in the volatile and rapidly evolving world of digital assets.
Justin Sun, the creator of Tron, is expressing dissatisfaction with the introduction of the wrapped Bitcoin token (cbBTC) by Coinbase Global Inc, an American cryptocurrency exchange. Specifically, he’s asking for Coinbase to make public their Proof-of-Reserve report, a document that discloses the financial health condition of the platform.
Sun’s petition follows quickly after Coinbase CEO Brian Armstrong denied allegations that the platform distributed IOUs for Bitcoin, contrary to reports suggesting Coinbase had done so for the Bitcoin ETF issuer BlackRock Inc. (NYSE: BLK).
Justin Sun Says Auditing Is Not Enough
The cryptocurrency trading platform argues that it’s impractical to introduce Proof-of-Reserve (PoR) at this time. Yet, Justin Sun highlighted the increasing use of PoR by leading exchanges and challenged Coinbase for not adopting the same approach. On the other hand, Eric Balchunas, a senior ETF analyst at Bloomberg, opines that BlackRock’s involvement in cbBTC could boost its credibility.
He argues that well-regarded investment firms handling Bitcoin reserves strictly prohibit any mismanagement. However, Sun underscores the importance of transparency over perfection for the crypto community. In his view, Coinbase might be making a big deal out of nothing by suggesting that disclosing all wallet addresses is complex – in reality, it’s a fairly straightforward task.
Emphasizing the significance of maintaining control over funds within blockchain networks, Sun believes that while auditing accounts is crucial, it’s equally important to keep funds on-chain rather than relying excessively on external audit firms for security. He underscored this point by recalling the devastating collapse of FTX, a Bahamian-based crypto exchange, which dealt a severe blow to the global cryptocurrency industry two years ago.
In light of Signature Bank’s collapse, Tron’s founder emphasized that being publicly traded does not guarantee protection from bankruptcy. Consequently, he advised Coinbase to adopt its Proof-of-Reserve (PoR) system, which could enable the exchange to self-regulate more effectively. Implementing PoR might also strengthen Coinbase’s relationship with its community and other crypto supporters by demonstrating transparency and accountability.
cbBTC Hits $100M Market Cap in 24 Hours
A few days ago, the exchange introduced its new cbBTC product. As stated in their announcement, this product operates on the Ethereum network and utilizes the Layer-2 scaling solution Base. It functions as an ERC20 token and is notable because it’s fully backed by Bitcoin at a 1:1 ratio.
Coinbase explained that when their users transfer Bitcoin (BTC) from Coinbase to an address on Binance Smart Chain (Base) or Ethereum, the BTC is instantly swapped for an equivalent amount of cbBTC. Conversely, if users receive cbBTC in their Coinbase accounts, it will be exchanged back 1:1 for Bitcoin.
Upon its debut, I quickly identified several potential issues with its centralized structure, vulnerability to government intervention, and a certain level of obscurity. Transparency was also a concern I highlighted.
Even with some reservations, cbBTC managed to achieve a market capitalization of $100 million within its initial 24 hours, distributed equally between the Base and Ethereum platforms. According to Dune Analytics, the current supply of cbBTC tokens in circulation was approximately 1,720, with around 43% residing on Coinbase’s layer-2 network and the remaining 57% on Ethereum.
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2024-09-18 11:58