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Cryptocurrency investment product provider Grayscale Investments has decided not to provide on-chain proof of reserves or wallet addresses to indicate the underlying assets of its digital currency products, citing security concerns. I refused.
On Twitter on November 18th thread In order to address investor concerns, Grayscale has provided information regarding the security and custody of the cryptocurrencies it holds, all cryptocurrencies underlying its investment products are stored in Coinbase’s custody service, He said he did not go so far as to reveal the wallet address.
6) Coinbase frequently performs on-chain verification. Due to security concerns, we do not expose such on-chain wallet information and confirmation information through encrypted proof-of-reserve or other advanced cryptographic accounting procedures.
Grayscale (@Grayscale) November 18, 2022
Grayscale added, “We know that the previous point in particular will be disappointing for some people.”
Grayscale’s move comes amid pressure on crypto businesses to introduce proof of reserves following FTX’s liquidity issues and subsequent bankruptcy.
Some Twitter users criticized Grayscale’s view that the company’s decision to withhold wallet addresses had security concerns. comment Bitcoin (BTC) inventor Satoshi Nakamoto’s address is better known and more valuable to attackers, but “Satoshi’s Bitcoin remains safe.”
grayscale sharing letter Co-signed by Coinbase CFO Alesia Haas and Coinbase Custody CEO Aaron Schnarch to categorize Grayscale’s holdings by investment product, reaffirm that assets are “safe” and that each product has “its own on-chain address, and crypto always belongs to the applicable grayscale product.
Grayscale added that each of its products is set up as a separate legal entity and set up as “laws, regulations and documents.” […] You may not lend, borrow, or otherwise interfere with the underlying digital assets of the product.
Related: Nickel Digital, Metaplex and more continue to feel the effects of the FTX collapse
Grayscale is known for Grayscale Bitcoin Trust (GBTC), a security that tracks the price of Bitcoin. There are also products that track the prices of other cryptocurrencies such as Ether (ETH) and Solana (SOL).
Investors are concerned that Genesis Global, which serves as GBTC’s liquidity provider, suspended withdrawals on November 16, citing “unprecedented market turmoil”, resulting in significant withdrawals from the platform over current liquidity. It is to announce that a withdrawal has occurred.
Genesis is part of Digital Currency Group (DCG), a crypto-focused venture capital firm that also owns Grayscale. GBTC is trading at a discount of around 43% compared to its net asset value due to investor speculation about his GBTC exposure to Genesis.
