Coinbase to Introduce Proof of Reserves for Bitcoin Wrapper, Addressing Transparency Concerns

News Desk 1 October 2024

1 minute read

Coinbase plans to introduce verifiable proof of reserves (PoR) for its new Bitcoin Wrapper, cbBTC, in a bid to enhance transparency and address concerns raised by critics. The exchange confirmed the move on Monday, aiming to compete with other Bitcoin wrappers like Wrapped Bitcoin (WBTC) and 21.co Wrapped Bitcoin (21BTC).

This PoR system will allow users to verify that cbBTC is backed by actual Bitcoin, a crucial feature that has been under development for some time.

Lukas Staniszewski, a product manager at Coinbase, announced on X (formerly Twitter) that PoR had been part of the cbBTC plan since its inception. “The team is hard at work building it,” he said in a post on September 23.

Coinbase launched its wrapped Bitcoin product on September 12, but it faced immediate criticism for its lack of transparency, with some experts fearing it would fall behind competitors WBTC and 21BTC. The exchange was also accused of issuing “paper Bitcoin” to BlackRock, adding to the scrutiny.

Despite the criticism, cbBTC has seen significant early success. It reached a market cap of $100 million within the first 24 hours of its launch. Coinbase has also announced plans to bring cbBTC to the Solana network, signaling further expansion of its wrapped Bitcoin offering.

The introduction of PoR is expected to bolster confidence in cbBTC. While no specific timeline has been given for its release, Coinbase’s commitment to transparency through PoR has been emphasized in recent announcements. The exchange stated that PoR has been part of the cbBTC roadmap since its creation and will be implemented in due course.

This move is seen as a response to concerns raised within the crypto community, including those from Tron founder Justin Sun, who referred to cbBTC as “Central Bank BTC” and warned of potential security risks to decentralized finance. Nevertheless, Coinbase remains optimistic about the future of cbBTC and its role in the broader crypto ecosystem.