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Bitwise Publicly Discloses Wallet Address, Sets New Standard for On-Chain Transparency

Last Updated January 25, 2024 1:49 PM
Teuta Franjkovic
Last Updated January 25, 2024 1:49 PM

Key Takeaways

  • Bitwise has become the first U.S.-listed spot Bitcoin ETF to publish its wallet address.
  • The platform plans to collaborate with Hoseki to provide real-time, cryptographic proof of its ETF holdings.
  • An individual has donated a few satoshis to Bitwise’s Bitcoin ETF address, a unique event in the ETF industry.

On January 24, Bitwise Asset Management, known as “the largest crypto index fund manager in America,” made a significant announcement  regarding its Bitwise Bitcoin ETF (BITB).

This spot ETF, along with ten others from different firms, received approval from the U.S. Securities and Exchange Commission (SEC) on January 10 and began trading the following day.

Bitwise Leads the Way in Bitcoin ETF Transparency

Bitwise Asset Management, in its pursuit of greater transparency in the cryptocurrency space, sees  the publication of on-chain wallet addresses for its Bitwise Bitcoin ETF (BITB) as merely the first step in a broader journey. The firm envisions future enhancements in infrastructure that will augment this transparency. To this end, Bitwise is keen on collaborating with companies such as Hoseki , that specialize in providing real-time cryptographic attestations.

This partnership aims to leverage Hoseki’s expertise to offer real-time, cryptographic proof of the ETF’s holdings, thereby bolstering the transparency and reliability of BITB.

Proposing Decentralized Custody Network for Enhanced Security

Following Bitwise Asset Management’s announcement about publishing the wallet address for its Bitcoin ETF holdings, analyst Joe Burnett reacted positively, commending the move with a simple yet enthusiastic “Nice!” Beyond his initial approval, Burnett proposed  an innovative idea aimed at further enhancing the security and decentralization of the ETF.

Burnett’s suggestion involves the use of a network of geographically distributed key agents. This approach would decentralize the custody of clients’ Bitcoin, ensuring that it does not depend on a single, centralized custodian. By distributing the responsibility of holding the keys across multiple locations and agents, this method significantly reduces the risk associated with a single point of failure.

This proposal aligns with the fundamental principles of blockchain and cryptocurrency, which prioritize decentralization and security. Implementing such a system could potentially set a new standard for security in cryptocurrency ETFs, offering enhanced protection for investors’ assets and reinforcing confidence in these financial products.

Bitwise’s Unique Move Leads to Satoshi Transfer

Shortly after Bitwise’s action, an individual chose to transfer a few satoshis to this address.

Bloomberg’s senior ETF analyst Eric Balchunas expressed  his intrigue at a unique event in the ETF industry, where someone donated underlying assets directly to a fund, a move made possible because Bitwise had published their Bitcoin addresses.

Balchunas highlighted  the unprecedented nature of this act, noting that it’s never a dull moment in the field. He admitted  his uncertainty about how this could impact the ETF’s share price, considering the traditional process involves an Authorized Participant (AP) giving money to the issuer, and this donation circumvents that without creating new shares.

Balchunas speculated that it might be analogous to securities lending revenue, suggesting the possibility of incorporating it into the Net Asset Value (NAV) like a rebate on the expense ratio, as he tries to fully grasp the implications of this unusual transaction.

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