Grayscale cites security concerns for withholding on-chain proof of reserves
Cryptocurrency investment product provider Grayscale Investments has refused to provide on-chain proof of reserves or wallet addresses to show the underlying assets of its digital currency products citing “security concerns.”
In a Nov. 18 Twitter thread addressing investor concerns, Grayscale laid out information regarding the security and storage of its crypto holdings and said all crypto underlying its investment products are stored with Coinbase’s custody service, stopping short of revealing the wallet addresses.
6) Coinbase frequently performs on-chain validation. Due to security concerns, we do not make such on-chain wallet information and confirmation information publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure.
“We know the preceding point in particular will be a disappointment to some,” Grayscale added, “but panic sparked by others is not a good enough reason to circumvent complex security arrangements that have kept our investors’ assets safe for years.”
The move by Grayscale comes as pressure mounts on crypto business to introduce proof of reserves in the wake of FTX’s liquidity issues and subsequent bankruptcy.
Some Twitter users hit out at Grayscale’s view that security concerns surrounded its decision to withhold its wallet addresses, with one commenting the addresses of Bitcoin (BTC) inventor Satoshi Nakamoto are well known and are of higher value to attackers, “yet Satoshi's Bitcoin remains secure.”
Grayscale shared a letter co-signed by Coinbase CFO, Alesia Haas, and Coinbase Custody CEO, Aaron Schnarch, that broke down Grayscale’s holdings by its investment products and reaffirmed the assets “are secure”, that each product has its “own on-chain
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