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After the mess of FTX, the term “proof of reserves” or PoRs gained the attention of the crypto community. While many of the crypto firms do not seem comfortable providing PoRs, still analysts seem they are in.
Here, the term Proof of Reserves or PoR is an auditing procedure that is verified through cryptographic proofs, checks of public wallet ownerships, and recurring audits to certify the holdings of an exchange.
Ergo’s Research Report
Grayscale, a digital asset management firm, already refused to provide PoRs for its Grayscale Bitcoin Trust (GBTC.) Ergo, OXT Research Analyst, used on-chain forensics and confirmed the approximate 633K BTC balance is held by G(BTC) at Coinbase Custody.
Additionally, Ergo previously wrote about its Part-1 analysis in which they have used to profile the Grayscale Coinbase Custody wallet activity and manually ID associated addresses.
“Part-1 largely exhausted exploration of the post July 2019 XAPO >> Coinbase Custody transaction graph.”
Ergo scanned the blockchain, and then with the help of a demo-graph, it showed how Grayscale and Coinbase Custody interacted with known counterparties.
It has also given the link of addresses and balances that came out from its analysis. The platform further noted that “no heuristic or set of heuristics are perfect, and their analysis certainly includes false positives and negatives. But, their result is almost identical to the G(BTC) self-reported holdings.”
Based on the results of their analysis, Ergo estimated: 634,639 BTC, with G(BTC) Reported: 633,394 BTC, which concluding that Grayscale’s self-reporting is credible.
Furthermore, it then raised the question “Why?” as despite holding what they (Grayscale) claim to hold.
On the other hand, Ergo highlighted two sentences from a letter that clarified Coinbase Custody is willing to disclose addresses.
After their research, Ergo guesses the reason why Grayscale does not want to disclose their addresses, is to avoid providing information about who their most frequent counterparties are (i.e. DCG, Genesis, etc.)
Additionally, Ergo summarise their whole research as-
1 – They have been able to independently verify the credibility of G(BTC)’s holdings of 633k BTC using on-chain forensics and public data.
2 – Grayscale refuses to disclose their addresses for unknown reasons, despite an apparent willingness by Coinbase Custody.
Ergo wrapped-up by adding its analysis as Grayscale’s refusal to disclose addresses or participate in a Proof Of Reserve serves to invite more scrutiny of their activity from the community and users.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
