Within the first 24 hours of Coinbase unveiling its wrapped Bitcoin, cbBTC, on the Base Network, it has stirred up some commotion. Tron creator Justin Sun has expressed multiple concerns about the fresh offering, voicing them publicly. Some of his supporters seem to share his perspectives on Coinbase’s cbBTC.
Justin Sun has raised issues regarding the transparency of cbBTC, pointing out the absence of Proof-of-Reserve (PoR) for the new Coinbase product. According to Sun, cbBTC lacks audits and could potentially freeze users’ balances without warning, functioning more like a “trust me” setup with inadequate accountability proof.
In a critical observation, Sun highlighted the vulnerability of one’s BTC holdings to possible seizure under a U.S. government subpoena, dubbing it a representation of centralized Bitcoin control. The launch of cbBTC by Coinbase on the Layer-2 network brought about a surge in the unrelated cbBTC token value by over 93% to $0.000153.
The introduction of PoR in the crypto realm gained significance following notable mishaps involving Terra/LUNA and FTX in 2022. These reports serve as a measure to ensure transparency and financial stability within protocols.
Various crypto exchanges, such as Binance, routinely publish PoR reports to uphold transparency and accountability. The latest report from Binance disclosed its BTC holding ratio against user balances at 106.84% and Ethereum holdings at 4,486,359.895 ETH with a ratio of 103.68%. Whether Coinbase plans to release a cbBTC PoR report in response to Justin Sun’s concerns remains uncertain.