Originally published on: September 23, 2024
21.co, the parent company of cryptocurrency asset manager 21Shares, announced the integration of Chainlink’s proof of reserve into 21BTC on Ethereum and Solana. This move aims to alleviate potential worries about the backing of the Bitcoin wrapper.
The inclusion of proof of reserves ensures protection against malicious minting by providing cryptographic guarantees that new tokens minted are adequately backed by reserves, according to 21.co.
Concerns around the safety of underlying spot Bitcoin backing have been on the rise among cryptocurrency retail investors, particularly with Bitcoin wrappers like Wrapped Bitcoin and Coinbase Wrapped BTC (cbBTC).
Chainlink’s proof of reserves offers automatic audits of financial data, including off-chain reserve balances, transmitting this information to a blockchain-based smart contract in real-time.
Recently, BitGo agreed to grant Hong Kong-based crypto exchange BiT Global partial control of the multisignature wallet holding WBTC’s Bitcoin capital, stirring controversy due to the involvement of Justin Sun.
Decentralized finance (DeFi) protocol Sky, formerly known as Maker, decided to remove WBTC from its platform while Coinbase’s cbBTC has gained popularity, becoming the third-largest wrapped BTC token.
Issues regarding the safety of cbBTC’s BTC backing surfaced following a BlackRock filing requesting faster BTC withdrawal times. In response, Coinbase assured holders that they would be reimbursed for any BTC backing lost to a cybersecurity exploit.
Regulated custodians and ETF sponsors like Coinbase and BlackRock in the US are under strict oversight and reporting requirements, including regular third-party audits. Eric Balchunas, an ETF analyst at Bloomberg Intelligence, highlighted the experienced and trusted nature of BlackRock in handling ETF holdings.
