Why Michael Saylor thinks proof of reserves ‘is a bad idea’
Saylor has faced backlash from the crypto community after rejecting calls for proof of reserves.
- Saylor stated that the current ‘proof of reserves’ was insecure and a ‘bad idea’ for institutions.
- The crypto community termed his PoR stance a ‘major red flag.’
Michael Saylor has shunned the calls for his firm, Strategy (formerly MicroStrategy), to publish proof of reserves (PoR) for its reported Bitcoin [BTC] holdings.
Speaking during the Bitcoin Conference in Las Vegas, Saylor termed PoR as a ‘bad idea’ and a security risk.
“The current, conventional way of publishing proof of reserves is insecure. It actually dilutes the security of the issuer, custodians, exchange, and investors.”
He added,
“It’s not a good idea, it’s a bad idea, like publishing the address, bank accounts, and phone numbers of your kids and thinking it’ll make your family better.”
According to him, the current PoR is irrelevant without the audited liabilities of institutions. As such, for safe and secure crypto reserve attestation, firms audited by the Big 4 (PWC, KPMG, etc) may be the best shot.
Mixed reactions on Saylor’s stance
However, most of the X crypto community didn’t agree with him. Whale Panda called Saylor’s stance a ‘major red flag.’
“Talking about a major red flag. He compares it to publishing bank accounts and phone numbers…The whole point of Bitcoin is its transparency.”
Another market watcher, Pledditor, echoed Whale Panda’s sentiment and added,
“PoR may compromise your privacy (and there is a valid list of criticisms about that), but it overall does NOT compromise the security of your coins. Saylor either has something to hide, or he’s completely ignorant about how Bitcoin works.”
The proof of reserve concept gained momentum after the FTX implosion in 2022 amid gross misappropriation of customer funds.
In response, the industry key leaders, especially exchanges like Kraken, began publishing their PoR to ensure transparency.
At the same time, revealing wallet addresses with funds may attract threat actors. In essence, the above discussion isn’t about whether Saylor or his critics are right or wrong, but a careful balance between transparency and security.
That said, Strategy now owns 580,250 BTC or 2.7% of the total supply, worth about $63.46 billion at current prices.
The cost of acquisition is reported to be $40B, meaning the firm is sitting on over $22 billion in unrealized profit. However, Arkham has only managed to track $35B BTC of its holdings.
Meanwhile, Saylor has publicly stated that he won’t sell the BTC holdings and will always buy the top. But any sell-off by Strategy, breach, bankruptcy, or any other negative update may drag BTC and the overall crypto market.
This is particularly the risk concern that the crypto community has raised in the past, given the firm’s growing influence in BTC supply.
Strategy’s stock, MSTR, closed 26th of May’s trading session at $269, marking a 7.5% loss. MSTR’s performance followed BTC’s price fluctuation above $106K.
