Cryptocurrency index fund and ETF provider Bitwise has publicly shared the address where it stores the BTC reserve of its Bitcoin spot ETF.
The asset company shared the BTC address it uses for its Bitcoin ETF, in support of the Transparency in the crypto sector.
However, the publication of his Bitcoin address has set off alarm bells in the crypto community, as it is a legacy BTC address, of the Pay-to-Public-Key-Hash type, which starts with 1 and is the oldest and default address format on the Bitcoin network. Additionally, the wallet used by the asset company It is not a multisig wallet, which means that the stored funds are protected by a single private key.
Experts point to this as a serious security breach by the asset management company, considering that Bitwise stores more than 14.541 BTC at that address, worth over $630,5 million at the time of writing.
Underestimating the importance of multisig wallets
Multisig wallets are primarily used by businesses holding cryptocurrencies to provide an additional layer of security and protection to their assets.
As the name implies, these types of wallets require more than one signature, i.e. multiple signatures, to transfer funds from one address. This greatly differentiates them from single-key wallets, which only require one signature to authorize transactions and move funds.
Thus, to carry out a transaction from a multisig wallet, two or more signers must use their respective private keys at the same time, which prevents one of the signers from moving funds without authorization from the rest.
In the case of Bitwise, by using a single-signature wallet, the crypto community is concerned that it seems the company is underestimating the importance of security in digital assets. Bitcoin and cryptocurrency enthusiast Mike Blanco commented that “single points of failure are not an option when it comes to life savings.”
Hacking risk
One of the main risks posed by a single-key wallet like the one currently used by Bitwise is the risk of hacking. Recently, the personal wallet of Ripple co-founder Chris Larsen was hacked. Hacked for over $100 million dollars.
Although Larsen assured that the attack was directed at him and not at the company's wallets, it caused a significant drop in the value of XRP in the last few hours, which is trading below $0,50 per token.
MPC Bitcoin Wallet
While most point to a serious security flaw, there are those who differ in that using a legacy, non-multisig BTC wallet does not pose a security risk to Bitwise BTC.
X user @0xngmi, creator of a dashboard on the DeFi platform Llama, believes that the concern about the wallet Bitwise is using to store the BTC of his exchange-traded fund is just an exaggeration. On X, user @XNUMXxngmi, who created a dashboard on the DeFi platform Llama, believes that the concern about the wallet Bitwise is using to store the BTC of his exchange-traded fund is just an exaggeration. said that “it is obvious that they are using MPC tECDSA for this so effectively that it is the same as a multi-signature.”
According to @0xngmi, Bitwise may be implementing a multi-party computing-based wallet to improve the security of your Bitcoin holdings.
This technology allows the private key of a wallet to be split into several shares, each of which must be used when signing a transaction in order for it to be processed. The combination of these shares must result in a signature exactly the same as if the transaction had been signed with the entire private key.
tECDSA wallets, which implement multi-party computation, require at least two of the total pool of shares to be involved in signing a transaction in order to reach consensus for it to go through, though there appears to be no evidence that Bitwise is using one of these wallets.
On the other hand, it is believed that the security of the Bitwise wallet seed phrase may have been divided into several parts internally, to increase its security and protection.
Transparency in the cryptocurrency industry
As mentioned at the beginning, Bitwise has published the address where it stores the BTC of its spot fund for the sake of transparency. In fact, it is the first Bitcoin ETF provider to publish the BTC addresses of its holdings.
Bitwise he highlighted That, with this, now anyone can verify the holdings and flows handled in BITB, directly on the blockchain and that, in the future, it hopes to work with companies such as Hoseki to provide certifications of their cryptocurrencies in real time.
Continue reading: “Bitcoin is a safe haven,” say investors in China
IMPORTANT: The content of this article is for informational purposes only and, in no case, what is written here should be taken as investment advice or recommendations. Bit2Me News reminds you that before making any investment you should educate yourself and know where you invest your money, as well as the pros and cons of the system. We separate ourselves from the actions and consequences that ignorance may entail. If you decide to invest in this or another asset class, you are solely responsible for the consequences that your decisions and actions may have.
