The Defiant recently revealed that Coinbase controls 11% or approximately 2.275 Million BTC, worth $129 Billion.
As the fourth-largest cryptocurrency exchange globally, Coinbase commands significant trading volume—$1.5 billion in 24-hour transactions and 34 million monthly users—and acts as a custodian for major corporations, including BlackRock, Tesla, and MicroStrategy.
This concentration has led to important concerns about potential risks that come with this type of centralization.
What Happens If A Coinbase Disaster Occurs?
The Persuader reportCritics argue that an asset concentration can cause systemic risk, especially if the exchange faces security concerns, legal pressures or other crises.
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Jameson Lopp is the CTO at multi-sig custodian Casa. He points out that Coinbase, while considered to be more stable than other platforms, has some flaws. exchangesIt remains susceptible to nation-state pressures, and it could be faced with scenarios similar to those of the US government’s historic seizure gold in the 1930s.
The implications of a Coinbase disaster—such as a hack resulting in the loss of customer funds—could reverberate throughout the cryptocurrency market. This would undermine the public’s confidence in cryptocurrency and could lead to significant declines in market pricesPotentially triggering an extended bear market.
According to the report, the fears are heightened by the fact more than 72 million Americans own accounts on this platform. The fallout from the incident could impact a large number of investors.
Is a Bitcoin Fork on the Horizon
Although some experts believe, such as Steven Lubka, from Swan Private that Coinbase is not likely to cause a catastrophe, others, including Steven Lubka, are less optimistic. “advanced security measures,” The risk of centralization in custodial matters remains an issue.
The idea of a Bitcoin fork to recover lost assets—similar to the Ethereum situation following the DAO hack in 2016—has been suggested. Experts believe, however, that while Bitcoin is influential stakeholders One might call for a return to “recover” Bitcoin, due to its decentralized network, would reject any such proposal.
Lisa Neigut explains, as the founder of Base58, that Bitcoin’s Unspent Transaction Output Model (UTXO), which is unique to Bitcoin, creates a protective buffer from centralized risks. If a bug impacts a certain entity’s keys in this model, then it will only impact that particular entity. The integrity of your network is preserved.
It is important to separate concerns in order to maintain the integrity of the Bitcoin protocol. This is especially true when faced with potential threats of centralization. Concerns persist, however, about the potential influence of large custodians such as Coinbase on the wider ecosystem.
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Armin Sabouri warns Botanix Labs’ CTO that major holders may coerce the public by threatening their assets. This could crash the market and force the network This will lead to the ossification of Bitcoin in response to demands. The decentralization ethos at the core of Bitcoin is directly challenged by this scenario.
Summarizing, there is still a debate about the level of risk that comes with an increased holding of coins on the exchange. Another important factor is that with an increasing number of ways to possibly hack or try to hack exchanges such as Coinbase, we must monitor these scenarios and take preventative measures to ensure they do not happen again. Gox disaster.
Bitcoin’s price was $57,650 at the time this article was written. It had failed for the second day in a row to surpass the $58,000 level of resistance.
Chart from TradingView.com, image from DALL.E
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Source: www.newsbtc.com