$1.5 Billion Bitcoin Exodus from Coinbase
Coinbase continues to take another hit recently having $US1.5 Billion worth of Bitcoin withdrawn from it's service and while this doesn't mean Bitcoin is being dumped it indicates the loss of faith towards centralised exchanges and the risk imposed on investors.
While keeping your assets on an exchange may provide ease of access it is important to note that while your assets are held there the exchanges continue to use your assets to trade to other investors. This form of business model is what has led to many crashes and losses of digital assets and it is where the term Not your keys not your asset comes from.
Due to the lack of regulation if an exchange sells your tokens to other users and they withdraw them or utilise them in high risk investments if they are lost exchanges can find it hard to replace the lost tokens leading to freezing of accounts and suspension of trading.
Traditional fiat banking undertakes this form of trades and it is how the loan system works however the sector is regulated and Banks tend to have insurance and government backing in the event of something goes horribly wrong like it did in the 2008 global financial crisis.
This is something that crypto exchanges do not have in their arsenal to protect investors and they aren't even required to actually hold the assets they are selling you. For all you know the asset showing up in your wallet on an exchange may not even be there.
The method isn't new either with it first coming to market when money was gold backed and credit notes or paper money was tied to the amount of gold you had in savings. This was also a way to ensure Gold was kept safe and reduced the amount of skimmed gold coins that were coming into circulation.
As previously coins were not the shape they are today and often had rough edges and without the proper equipment to measure weight people would often skim the edges of precious metal coins reducing their size and weight unnoticeably and then melting down the off cuts in order to create a new coin.
Later on ridged coins like we have today came into circulation so people would know if coins were ground back, although as they're no longer made of precious metals anymore unless investment the issues isn't as concerning today as it was yesterday.
Binance Proof Of Reserve
In other news to ensure market confidence and to take the upper hand in the market Binance has developed a Proof Of Reserve system and the numbers are looking good with the centralised exchange building it's holdings. Currently Binance has 575,742.4228 customer held Bitcoins and it has also managed to add an additional 6,743.5074 Bitcoins which is 1% higher than customer deposits.
This means that if everyone all of a sudden decided to withdraw their Bitcoin funds from Binance the network would still have Bitcoins to continue trading with which means everyone participating on Binance won't end up with ghost wallets.
Users can verify their Bitcoin Assets on Binance by utilising the Proof of Reserve service.
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