Coinbase may have lied about the number of bitcoins they store

[ChetnotAtkins]

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.

[pedrog]

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.

ROTFL

The entire thread is hilarious, people have way too much time to waste...

[odolvlobo]

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.

The problem with your post is that you are only guessing, just as you wrote. My guess is that Coinbase does indeed own most of the Bitcoins in multi-sig addresses. I don't see why that couldn't be true. Multi-sig usage is very low.

[ChetnotAtkins]

My guess is that Coinbase does indeed own most of the Bitcoins in multi-sig addresses. I don't see why that couldn't be true. Multi-sig usage is very low.

Wrong: Kraken uses Multisig. Xapo uses Multisig. Bitgo uses multisig. Bitfinex uses multisig. OKCoin uses multisig. Huobi uses multisig...

Do you want to guess again?


It does look like Coinbase has in fact been lying to users and investors.

[Bitcoinpro]

Wat haven't they lied about

[pedrog]

My guess is that Coinbase does indeed own most of the Bitcoins in multi-sig addresses. I don't see why that couldn't be true. Multi-sig usage is very low.

Wrong: Kraken uses Multisig. Xapo uses Multisig. Bitgo uses multisig. Bitfinex uses multisig. OKCoin uses multisig. Huobi uses multisig...

Do you want to guess again?

Bitstamp uses multisig...

My guess is all of them are lying,

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.

All of those exchanges combined have less than 12% of all bitcoins...

It's a conspiracy!

[gmaxwell]

I'd just assumed a narrow definition of "in circulation".

[calkob]

To be honest it really does not surprise me if this is the case, you give anyone power to basically control the funds of others and you will end up with a corrupt system, sure thats how the early banks started by lying about how many noted they had created compared to gold and silver they held on acount.

[pbleak]

Have you considered not all the funds are in multisig...not to state the obvious or anything.

[ChetnotAtkins]

Have you considered not all the funds are in multisig...not to state the obvious or anything.

They claim 97% of user funds. So that doesn't leave much. Is it likely that Coinbase's own funds constitute multiple % of all bitcoins... No.

I'd just assumed a narrow definition of "in circulation".

Yes that's their best bet now. Unfortunately in the same breath they'll have to reveal that Coinbase's holdings are not exactly substantial.

[Bitcoinpro]

My guess is that Coinbase does indeed own most of the Bitcoins in multi-sig addresses. I don't see why that couldn't be true. Multi-sig usage is very low.

Wrong: Kraken uses Multisig. Xapo uses Multisig. Bitgo uses multisig. Bitfinex uses multisig. OKCoin uses multisig. Huobi uses multisig...

Do you want to guess again?

Bitstamp uses multisig...

My guess is all of them are lying,

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.

All of those exchanges combined have less than 12% of all bitcoins...

It's a conspiracy!

This is how Coinbase transmits their Ethereum

[amacar2]

May be this is to get attention from investors and i have also seen lots of account getting banned by them and i was confused where those all bitcoin goes into. I feel more secure with electrum and blockchain.info

[Kprawn]

Coinbase will soon change their whole business model to survive the exodus of people not trusting their service. They already started supporting Eth pumpers in an attempt to stimulate business. I have

no faith in these guys and what they doing to Bitcoin is highly unethical. {Having people sacrificing their financial freedom to bow down before governments} If they truly felt passionate about the tech,

they would have relocated to a country, where Bitcoin regulations were accommodating towards the Bitcoin users and not the government. Many other companies did that, when the BitLicense came

out in New York. 

[ChetnotAtkins]

They just silently changed the rep post where it was claimed that 97% of user funds are in multisig

Luckily their deception was anticipated, here is a screenshot of the original, unchanged version: http://imgur.com/2fCMoPP

[TheMage]

My guess is that Coinbase does indeed own most of the Bitcoins in multi-sig addresses. I don't see why that couldn't be true. Multi-sig usage is very low.

Wrong: Kraken uses Multisig. Xapo uses Multisig. Bitgo uses multisig. Bitfinex uses multisig. OKCoin uses multisig. Huobi uses multisig...

Do you want to guess again?

Bitstamp uses multisig...

My guess is all of them are lying,

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.

All of those exchanges combined have less than 12% of all bitcoins...

It's a conspiracy!

This is how Coinbase transmits their Ethereum

Utilizing a parabolic dish is certainly an effective means of transmitting data across large distances. The directivity provides increased gain, ensuring the data stays above the local noise.


I fail to see a problem here.

EDIT: Ohh I see the problem, its a receive dish and you said transmit! 

[ebliever]

I'd just assumed a narrow definition of "in circulation".

That's my assumption as well. Take ~15 million BTC, deduct Satoshi's coins, lost coins, and all the coins people like me are sitting on (not in circulation) and I bet we're looking at a fraction of the total well under 50%. That strongly influences the conclusions that can be drawn.

Besides, they wouldn't need to move coins to prove ownership, right? Just sign messages with the keys holding the bulk of the coins? Wouldn't that be safer?

[ChetnotAtkins]

They do infact claim to store (or at that time have stored) 10% of all mined bitcoins... What an utter lie.

Charlie Lee just confirmed it:

https://www.reddit.com/r/Bitcoin/comments/4md665/coinbase_may_have_lied_about_the_number_of/d3uyda7


Here is a screenshot in case they change the comment again.
http://imgur.com/wCu58Qz

[Carlton Banks]

Oh dear, lying financial corporation? That lies about their finances? The actual assets? Client assets!!!? Oh dear, dear me.

[sishendaoye]

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.

ROTFL

The entire thread is hilarious, people have way too much time to waste...

You are right about that, if you do not have the fact to build a discussion about it, simply do not make such topics...its really annoying.

[ravens]

RIP Coinbase, it won't survive the flood of people leaving it's services(or will it? Only time can tell.)(this is me assuming that people will leave it's service because it has been caught in a lie).