Saylor says onchain proof-of-reserves a ‘bad idea’ due to security risks

Michael Saylor, the executive chair of major Bitcoin-buying firm Strategy, formerly MicroStrategy, says institutions posting onchain proof-of-reserves is a “bad idea” that could pose security risks.

“The current, conventional way to publish proof of reserves is an insecure proof of reserves,” Saylor said when asked about institutions adopting the transparency measure at a May 26 event on the sidelines of the Bitcoin 2025 conference in Las Vegas.

“It actually dilutes the security of the issuer, the custodians, the exchanges and the investors. It’s not a good idea, it’s a bad idea.”

Saylor didn’t answer whether Strategy would publish its proof-of-reserves when  asked  by Blockware Solutions head analyst Mitchell Askew whether his firm would do so.

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Proof-of-reserves  are common among crypto exchanges and verify that the company holds sufficient crypto reserves to cover customer deposits. They can also confirm that other entities, such as crypto-tracking exchange-traded funds, hold the required amount of crypto for the funds.

Saylor acknowledged the industry had a lot to learn from the collapses of crypto exchanges FTX and Mt. Gox, but said proof-of-reserves isn’t the correct measure to take for institutions.

“No institutional-grade or enterprise security analyst would think it’s a good idea to publish all of the wallet addresses, such that you could be traced back and forth.”

“Go to AI, put it in deep think mode and then ask it ‘what are the security problems of publishing your wallet addresses?’ and ‘how might it undermine the security of your company over time,” Saylor said, adding it would write “50 pages of security problems.”

Proof-of-reserves increasingly adopted after FTX collapse

Many crypto exchanges, custodians and  exchange-traded fund issuers  started publishing their proof-of-reserves following FTX’s collapse in November 2022 to establish transparency and prove that they hold enough assets to back customer deposits.

Related:  Strategy bags 4,020 Bitcoin as price briefly breaks $110K Crypto exchanges  Binance,  Kraken and  OKX  and crypto asset manager  Bitwise  are among the industry players that have adopted the transparency measure.However, Saylor noted that proof-of-reserves often only show one side of the picture — what the company holds — and  not what they owe .

  Source: Mitchell Askew

Saylor’s Strategy is the world’s  largest corporate Bitcoin holder,  with 576,230 Bitcoin worth $62.6 million on its balance sheet, followed by Bitcoin mining firm MARA Holdings, which holds 48,137 Bitcoin,  according  to BitcoinTreasuries.NET.

More than 110 publicly traded companies worldwide have  purchased and hold Bitcoin .