A few weeks ago, “Whale Watcher” noticed transactions of unusually large amounts of Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC). Some speculated that these transactions were made by Coinbase concerning its secret operational security practices. As Coinbase now confirmed, the assumptions were correct.
In a recent blog post, Coinbase confirmed that many of these “whale” transactions were actually due to internal security measures. The company revealed that it has recently moved 5% of all Bitcoin, 8% of all Ether and 25% of all Litecoin in circulation through a series of transactions.
This is believed to be the “largest crypto migration since the Existence of the study”. And it looks like the dollar value of the company’s holdings is worth a staggering $ 5 billion. The series of transactions is the largest sequence of transactions ever executed by a single entity. This includes all exchanges, whales, investment groups or Satoshi Nakamoto himself.
According to the blog post, one of the main reasons for the transactions was a pre-planned security upgrade. The crypto exchange was preparing for its on-going token expansion, which introduced a number of new cryptocurrencies to Coinbase in recent months.
Coinbase’s business model initially focused on a few cryptocurrencies only: Bitcoin, Ethereum, Bitcoin Cash and Litecoin. A few months ago, the exchange added Ethereum Classic (ETC), Basic Attention Token (BAT) and Zcash (ZEC). Just yesterday, the Coinbase added four more tokens: Golem, DAI, Maker and Zilliqa.
New Coinbase Storage Facility
As for the underlying fundamentals, the newly updated Coinbase storage system originally started in October, when the technical team conducted a key generation process. In short, the process was to create a set of keys, and by supporting scan-friendly QR codes, these keys were then divided.
The cryptographic process, also known as Shamir’s Secret Sharing, is a mechanism designed to keep private information secure. After dividing the keys, they are then distributed between several locations. Several Coinbase employees have to unlock them together. Although this process sounds very similar to a Multisig-wallet, the key difference is that it is compatible with cryptocurrencies that would not otherwise be appropriate.
According to Coinbase, this system reduces the risk of key loss and abuse while supporting “top notch key governance and audit while being currency independent”. Given the exchange’s desire to establish a good relationship with US regulators and attract institutional investment, Coinbase is likely to hope that its newly introduced storage system will convince users that it will become the platform of choice for big investors.
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