Justin Sun has expressed concerns about the lack of Proof-of-Reserve for cbBTC, alleging that it does not undergo audits.
In spite of the fact that it has only been twenty-four hours since Coinbase launched its wrapped Bitcoin, cbBTC, on the Base Network, it has already caused quite a stir.
Justin Sun, the founder of Tron, has a long list of worries over the new product and he has taken X to voice some of those concerns himself. It appears that some of his followers share his opinion about Coinbase cbBTC.
Justin Sun Concerned About cbBTC Transparency
Specifically, Justin Sun has brought attention to the fact that the Coinbase product does not have Proof-of-Reserve (PoR). According to the founder of Tron, cbBTC does not conduct audits and has the potential to freeze anyone’s balance without providing any prior notice.
He is arguing that it is simply a “trust me” system that does not foster accountability through the use of evidence. The United States government has the power to seize all of your Bitcoin through any subpoena.
The only way to depict Bitcoin’s central bank accurately is this. It is a gloomy day for Bitcoin, as Sun pointed out. Coinbase, an American cryptocurrency exchange, introduced cbBTC on Base, which brought some Bitcoin to the Layer-2 network in order to provide some context on the cryptocurrency that is causing concern.
The exchange’s release stated that both the L2 network and Ethereum will support the wrapped Bitcoin token. Furthermore, the cryptocurrency exchange will back the ERC20 token with Bitcoin (BTC) in a one-to-one ratio.
In addition, Coinbase explained how cbBTC will provide Bitcoin holders with increased economic flexibility in terms of how they might use their holdings. Compound, Morpho, Moonwell, and Spark are among the platforms that the exchange intends to make available to those who wish to purchase wrapped Bitcoin.
Purpose of Proof-of-Reserve
The launch of this product led to a more than 93% increase in the value of the cbBTC token, independent of the product, to $0.000153. The cryptocurrency business is aware of the limitations Justin Sun has outlined, and it is important to consider them.
They became extremely important after the crash of Terra/LUNA in 2022 and the implosion of FTX, a cryptocurrency exchange with its headquarters in the Bahamas, in the same year.
Reports on points of reference have become mandatory over time in order to guarantee the protocol’s transparency and financial well-being.Frequently, cryptocurrency exchanges such as Binance provide proofs of work.
It has only been a few days since the top provider of digital asset services made public its 22nd Proof of Concept study. 106.84% is the percentage of Bitcoins that the exchange holds in contrast to the total amount of Bitcoins held by its users, as demonstrated by this data.
According to the Proof of Work, the total amount of Ethereum that exchange customers have is 4,486,359.895 ETH. At this time, the holding ratio for ETH is also 103.68%. In light of Justin Sun’s allegations, it is unclear whether Coinbase will reveal the cbBTC Proof of Rights at a later time.
