On December 9, the total market value of cryptocurrencies increased to more than $ 535 billion. This is a significant increase from last year, when the total market value of cryptocurrencies was just over $ 199 billion.
Given this impressive growth, it should come as no surprise that companies in the cryptocurrency sector are taking further steps to secure investor confidence. For example, some cryptocurrency platforms have launched public announcements of audits to confirm the number of digital assets under management.
Recently, Celsius Network, a platform for lending and borrowing cryptocurrencies, announced the completion of an independent audit of digital assets worth just over $ 3.3 billion. This audit follows the platform’s announcement that there is more than $ 2.2 billion in digital assets under management.
Alex Mashinsky, CEO and founder of Celsius, told Cointelegraph that the audit was validated with Chainalyses Reactor blockchain analysis tool. Jason Bonds, director of revenue for Chainalysis, told Cointelegraph that this is the first example of how the company’s products are used for investigation.
The audit of the Celsius network has been based on digital asset transactions, total deposits and total withdrawals since the platform launched its services in June 2018, Mashinsky said. He also noted that the audit shows how many of Celsius’ assets actually belong to:
“This audit gives our society a very clear independent view of how many assets the percentage owns. If these numbers also match many of the announcements we made, they confirm that we are not lying or misrepresenting our numbers. Since all this is registered on the blockchains, it is impossible for Celsius to change anything after it has happened.
Backup audit provides transparency, but does it create trust?
While the independent audit aims to provide a certain level of transparency to the Celsius community, some questions remain. Overall, Mashinsky shared the need to conduct independent backup audits to ensure that the crypto industry runs on reliable platforms. “The question is whether we should create a more reliable platform to replace banks and financial institutions that do not act in our best interests,” he said.
Meanwhile, some suggest that independent backup audits often lack security and other critical features. For example, bonds said that Celsius’ supervision does not provide additional security guarantees, which indicates that cryptocurrency platforms still need to take security measures to protect the business.
However, this may not be enough. Gonzalo Sa, security engineer at ConsenSys Diligence, an auditing service for Ethereum blockchain applications, told Cointelegraph that disposable securities cannot guarantee absolute security for any product: “Instead, it is an attempt to reduce asset risk. … ”
Sa also noted that a revision of reserves is necessary for conservative and unreliable products or services. For example, it was stated that the US lending service cryptocurrency Cred has a strong need for further confirmation. In November 2020, the company filed for Chapter 11 bankruptcy and claimed that it was facing irregularities while handling funds from these companies. Trust Bank shows its estimated assets of $ 50 to $ 100 million, as well as its estimated liabilities of $ 100 to $ 500 million.
With this in mind, some believe that contingency audits provide confidence and security. Richard Sanders, lead researcher and director of CipherBlade, a blockchain investigation firm, told Cointelegraph that a company or person can be dishonest about any number of things, so a reserve audit is not an audit of all aspects. However, Sanders added that companies in the cryptocurrency sector tend to lie about things like hacking, which is why reserve supervision is so good:
“The exchanges became insolvent after the breach was not detected or minimized. Simplified supervision, solvency audit or backup ensures that money that is supposed to be there is not lost due to a breach, or that someone bought the boat with the user’s money.”
Sanders also commented that the misuse of users’ cryptocurrency funds is not only related to stock exchanges, but also to lending services and other platforms. In the case of Cred, Sanders shared that these platforms could be a little more accurate. He said, “Creed played the devil’s protector here,” he said. – Maybe he had good reasons (which he meant a soft pun) for not announcing his investments, because it could warn competitors.
A step in the right direction
After all, any financial institution will be associated with trust and security issues. Just as cryptocurrency exchanges are being hacked, banks are facing many security challenges. However, it is worth noting that the crypto industry is taking steps to revise government reserves. Sanders explained that cryptocurrency does not require solvency and security auditing.