Coinbase Holds 5% of All Bitcoin and 25% of All Litecoin
A few weeks ago, “Whale Watcher” on Twitter noticed unusually large amounts of Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC) moving between crypto-wallets. Some seemingly “crazy” theorists speculated that the transactions were due to Coinbase and its secret operational security practices. As Coinbase confirmed, the assumptions were correct.
As Coinbase confirmed in a recent blog post, many of these “whale” transactions were actually due to internal security measures. The company revealed in the post that it recently added 5% of all Bitcoin, 8% of all Ethers and 25% of all Litecoin that has circulated, has moved through a series of transactions — which Coinbase has probably described as the “largest crypto-migration since the study was made”. And it looks like the dollar value of the company’s holdings is worth a staggering $5 billion. The series of transactions is the largest sequence of transactions ever executed by a single entity, be it a crypto firm, a whale, an investment group, or Satoshi Nakamoto himself.
According to the blog post, one of the main reasons for the transactions, the lengthy pre-planned security upgrade, was that the stock market was preparing for its on-going token expansion, which has introduced a number of new cryptocurrencies to Coinbase in recent months. Coinbase’s business model initially focused on a few cryptocurrencies — Bitcoin, Ethereum, Bitcoin Cash and Litecoin. For a few months, however, the crypto exchange has also added Ethereum Classic (ETC), Basic Attention Token (BAT) and Zcash (ZEC). Just yesterday, the exchange added four more tokens — Golem, DAI, Maker, and Zilliqa.
New Coinbase Storage Facility explained
As for the underlying fundamentals, the newly updated Coinbase storage system originally began in October, where the technical team conducted a key generation process. In short, the process was to create a set of keys, and by supporting scan-friendly QR codes, these keys were then split.
The cryptographic process, also known as Shamir’s Secret Sharing, is a mechanism designed to keep private information secure. After splitting the keys, they are then distributed to several locations — several Coinbase employees have to unlock them together. Although this process sounds very similar to a multisig wallet, the key difference is that it is compatible with cryptocurrencies that would not otherwise be appropriate.
Coinbase added that this system reduces the risk of key loss and abuse while supporting “top-notch key governance and audit while being currency independent”. Given the exchange’s desire to establish an excellent relationship with US regulators and attract institutional investment, Coinbase is likely to hope that its newly introduced storage system will convince users that it will become the platform of choice for big investors.
Author: Marko Vidrih @cryptomarks
Image via Shutterstock
