Shades of gray hide backup evidence in the chain for security reasons

Shades of gray hide backup evidence in the chain for security reasons

Grayscale Investments, a company that sells cryptocurrency investment products, declined to provide proof of reserves or online wallet addresses to showcase digital currency products’ underlying assets, citing “security concerns.” Grayscale Investments is a provider of cryptocurrency investment products. On November 18, Grayscale posted information about the security and custody of its cryptocurrency assets on a Twitter thread dedicated to solving investor problems. The company said that all cryptocurrencies underlying its investment products are stored in the Coinbase custody service, but refrained from disclosing wallet addresses.

Shades of Gray continued: “We understand that the previous point in particular will be a disappointment to some,” but “fear created by others is not a sufficient justification for breaching the complex security mechanisms that keep our clients’ funds safe.” for years.”

Following FTX’s ongoing liquidity issues and eventual bankruptcy, Grayscale decided to take this step in response to the growing pressure placed on the crypto industry to implement proof of reserve.

Some people on Twitter took issue with Grayscale’s view that the decision not to disclose wallet addresses was due to security concerns. One user noted that while the addresses of Satoshi Nakamoto, the inventor of Bitcoin, are widely known and highly valuable to attackers, “Satoshi’s Bitcoin remains secure.”

Shades of Gray circulated a letter signed by Alecia Haas, CFO of Coinbase, and Aaron Schnarch, CEO of Coinbase Custody. The letter details Grayscale’s assets in line with its investment products and confirms that the assets are “safe”. In addition, the letter stated that each product has “its own addresses on the network” and that the cryptocurrency always belongs to the “suitable grayscale product.”

Grayscale went on to state that each of their products is structured as a separate, independent law firm, and that “the rules, regulations, and contracts […] prohibit leasing, borrowing, or otherwise encumbering digital assets underlying goods.”

While Grayscale is best known for its Grayscale Bitcoin Trust (GBTC), a security that matches the price of Bitcoin, the company also offers products that follow the price of other cryptocurrencies such as Ether and Solana. Genesis Global, which acts as the liquidity provider for GBTC, announced on Nov. 16 that it was halting withdrawals, citing “unprecedented market turmoil” as the reason. These “unprecedented market turmoil” resulted in a significant withdrawal of funds from its platform, which exceeded its current liquidity. This raised concerns among investors.

Grayscale is also owned by crypto-currency venture capital firm Digital Currency Group (DCG), which is also the parent company of Genesis.

Investors are speculating on GBTC’s impact on Genesis, which could be one of the reasons the company’s shares are selling for more than 43 percent off its net asset value.

Written by khirou

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