Topic: Coinbase may have lied about the number of bitcoins they store - page 2. (Read 1053 times)

This post is from Reddit (https://www.reddit.com/r/Bitcoin/comments/4md665/coinbase_may_have_lied_about_the_number_of):


It looks like Coinbase may have openly lied about the number bitcoins they store to their users and perhaps even to their investors.

They claim that 97% of user funds are stored in multisig addresses. For instance here (https://community.coinbase.com/t/multisig-vault-what-if-coinbase-goes-out-of-business/3282)

The CEO of Coinbase, Brian Armstrong published this blog post (https://medium.com/the-coinbase-blog/coinbase-is-not-a-wallet-b5b9293ca0e7) in which he shamelessly claims that Coinbase is now storing 'about 10% of all bitcoin in circulation'.

The issue now is that, as we can see on p2sh.info (http://p2sh.info/dashboard/db/p2sh-statistics) at the time of this post only around 10% of all Bitcoins were held in p2sh addresses.

To explain the issue further: Multisig is just one usage of p2sh and many many Bitcoin companies, exchanges and private people are using multisig addresses.
So when we take all the other services and private users into account that use multisig addresses the 97% of user funds Coinbase holds in multisig are likely far lower than 5% of all bitcoins, we can only guess. I'd be surprised if they even constituted 1% of all bitcoins, to be quite honest.

Coinbase additionally has their 'cold storage' which seems to use some version of key splitting (shamir's secret) which would contain funds owned by Coinbase as well as the remaining user funds that are not in the hot wallet. Is it likely that Coinbase's own Bitcoin funds constitute multiple % of all bitcoins in existence? I don't think so.

If their 'cold storage' does in fact also use multisig, then their lie would be even greater.

So has Brian Armstrong lied to his investors and users? Has he exploited their lack of understanding of Bitcoin to make highly inflated claims?

If I were an investor I would demand Brian Armstrong to move all bitcoins under control of Coinbase as a proof of reserves right now.

It looks like Coinbase is not even close to as big as they make it seem. If all this venture capital has been raised by claiming false holdings, then things could get nasty.