when

cbBTC

<h4>Coinbase is one of the biggest centralized crypto exchanges in the world. It comes in third when measured by daily volume, with $1.6 billion. On <a href="https://www.coingecko.com/en/exchanges" target="_blank" rel="noopener">CoinGecko</a>, Coinbase scores a 10 for its ‘Trust’ score. </h4> 
That’s because it has third-party audits. However, with its $cbBTC derivative, things look different. There’s no PoR (Proof of Reserve) or any other form of transparency. So, what’s going on the Coinbase’s $cbBTC? 
<h5>What Is $cbBTC?</h5> 
$cbBTC is a <a href="https://www.coinbase.com/blog/coinbase-wrapped-btc-cbbtc-is-now-live" target="_blank" rel="noopener">wrapped version of Bitcoin</a>. It is an ERC-20 token, available in Ethereum and Base. There are plans to launch this token on more chains. Now, Coinbase should back this token 1:1 with $BTC they hold. And that’s where the issue arises. 
Coinbase has no Proof of Reserves for this token. A Proof of Reserves is a public report, from an independent auditor. This report, it shows a platform’s reserves, so it can prove its solvency to its depositors. The X post below is from Oxngmi, the founder of <a href="https://defillama.com/" target="_blank" rel="noopener">DeFiLlama</a>. 
<blockquote class="twitter-tweet"> 
 this tbh, almost every single bridge (including WBTC) provides a Proof of Reserves so you can check that the issued coins are backed 
 But Coinbase doesn’t, cbBTC is way below the standard in terms of transparency <a href="https://t.co/JhnXeZkgor">https://t.co/JhnXeZkgor</a> 
 — 0xngmi (@0xngmi) <a href="https://twitter.com/0xngmi/status/1838210973192130581?ref_src=twsrc%5Etfw">September 23, 2024</a>
</blockquote> 
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script> 
Almost every other wrapped version of $BTC has this PoR. In other words, you can see that $BTC backs the issued coins. This is reason enough for DeFiLlama to refrain from listing $cbBTC. The token only launched a few weeks ago, on 12th September.&nbsp; 
However, <a href="https://www.altcoinbuzz.io/?s=coinbase" target="_blank" rel="noopener">Coinbase</a> has reacted to posts on X about the lack of PoR. In their post, they acknowledge the importance of Proof of Reserves. Furthermore, it reads that they planned PoR from the beginning. See the X post below. 
<blockquote class="twitter-tweet"> 
 Thanks for surfacing this — we understand the importance of Proof of Reserves. With cbBTC, we’ve planned PoR since the early days and the team is hard at work building it. 
 We haven’t publicly stated this sooner because we wanted to build it first. And to provide further… 
 — Lukas Staniszewski (@call_me_lukas) <a href="https://twitter.com/call_me_lukas/status/1838333569975853117?ref_src=twsrc%5Etfw">September 23, 2024</a>
</blockquote> 
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script> 
<h5>Other Things to Consider</h5> 
Coinbase’s lack of transparency is something to consider in this case, but there’s more. For example, Coinbase Trust Co. is a regulated financial institution. However, the service agreement for $cbBTC is with Coinbase, Inc. In contrast to Coinbase Trust Co, this is not a regulated financial institution. 
In other words, when you deposit to Coinbase, Inc. your assets become Coinbase’s assets. So, in case Coinbase becomes insolvent, you can stand in line as a creditor if they go bankrupt. Even if your assets haven’t been lost. 
<blockquote class="twitter-tweet"> 
 Something to consider as well 
 The service agreement for cbbtc is with Coinbase, Inc, which is not a regulated financial institution and is separate from Coinbase Trust Co <img src="https://s.w.org/images/core/emoji/15.0.3/72x72/27a1.png" alt="➡" class="wp-smiley" style="height: 1em; max-height: 1em;"> When you deposit to Coinbase, Inc, your assets are Coinbase’s assets. If Coinbase becomes insolvent,… 
 — Gally Sama (@hdcharting) <a href="https://twitter.com/hdcharting/status/1838307277662523812?ref_src=twsrc%5Etfw">September 23, 2024</a>
</blockquote> 
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script> 
On the other hand, $WBTC is held in a regulated Trust Co. This means that assets are bankruptcy protected. For example, if BitGo would become insolvent, your assets are still yours. BitGo is the custodian for $wBTC. 
Another thing to consider is the freeze function. $wBTC doesn’t have a freeze function. However, $cbBTC does have a freeze function. Furthermore, $wBTC smart contracts are not changeable but $cbBTC smart contract are changeable.&nbsp; 
This means that Coinbase can freeze and blacklist addresses transacting with $cbBTC. They can do this straight via the smart contract. On the other hand, BitGo can’t do this. 
<blockquote class="twitter-tweet"> 
 Pledditor raises an important point here 
 wBTC comes with no freeze function cbBTC comes with a freeze option 
 wBTC smart contract are not changeable cbBTC smart contract are changeable 
 To fully grasp the implications, watch this short clip where <a href="https://twitter.com/BitGo?ref_src=twsrc%5Etfw">@BitGo</a> ‘s <a href="https://twitter.com/mikebelshe?ref_src=twsrc%5Etfw">@mikebelshe</a> talks… <a href="https://t.co/wNNO9QUpqa">https://t.co/wNNO9QUpqa</a> <a href="https://t.co/1Zy1uHtcMd">pic.twitter.com/1Zy1uHtcMd</a> 
 — Gally Sama (@hdcharting) <a href="https://twitter.com/hdcharting/status/1834291444451873162?ref_src=twsrc%5Etfw">September 12, 2024</a>
</blockquote> 
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script> 
<h5>Conclusion</h5> 
On 12th September, Coinbase launched its $cbBTC token, which it should back 1:1 with its $BTC holdings. However, Coinbase doesn’t have Proof of Reserve for $cbBTC. This is a serious lack of transparency by Coinbase. 
Coinbase can also freeze their derivative and change the smart contracts. Better be cautious when considering using $cbBTC until Coinbase at least offers a PoR. 
<a href="https://www.patreon.com/altcoinbuzz" target="_blank" rel="noopener"><img decoding="async" class="alignnone wp-image-123700 size-full" src="https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner.jpg" sizes="(max-width: 1197px) 100vw, 1197px" srcset="https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner.jpg 1197w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-300x37.jpg 300w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-1024x127.jpg 1024w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-768x95.jpg 768w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-696x86.jpg 696w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-1068x132.jpg 1068w" alt="$cbBTC" width="1197" height="148"></a> 
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The post <a href="https://www.altcoinbuzz.io/cryptocurrency-news/cbbtc-falls-short-on-transparency-and-proof-of-reserves/">$cbBTC Falls Short on Transparency and Proof of Reserves</a> appeared first on <a href="https://www.altcoinbuzz.io">Altcoin Buzz</a>.

$cbBTC Falls Short on Transparency and Proof of Reserves

Altcoin Buzz

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