Bitstamp, One of the Largest Bitcoin Exchanges, Passed Audit

UK-based bitcoin exchange Bitstamp has passed an audit run by BitcoinJ developer and former Google engineer Mike Hearn.

Photo: Bitstamp/Twitter

Photo: Bitstamp/Twitter

Bitstamp, a UK-based bitcoin exchange, has passed an audit run by BitcoinJ developer Mike Hearn.

Mike Hearn, the former Google engineer and the creator of BitcoinJ, confirmed that a Bitstamp proof of reserves procedure was made on 24th May.

“I was asked to act as a neutral observer during this procedure to help build community confidence in Bitstamp as a large holder of coins,” he mentioned in the report.

Mr. Hearn specified that the procedure is not a financial audit, but adds that:

“Bitstamp holds sufficient bitcoins to cover their customer deposits, as tracked by their master database.”

The report says: “As of 13:00 CEST 24/05/2014, Bitstamp held 183,497.40310794 BTC in their cold wallet. Combined with the money that was in their hot wallet this totalled to about 45 BTC more than the total customer deposits and Ripple IOUs recorded in their database.

A precise statement of how much more isn’t possible because the site was not suspended during the verification procedure and so the size of the hot wallet fluctuated throughout, as withdrawals and deposits were processed.”

The current price of 183,497.40310794 BTC is around $102.9million, according to CoinDesk Price index.

How it worked

Mr. Hearn’s report states:

“To prove to me the size of the company’s deposits, I was given direct MySQL access to their master database. We ran a SQL SELECT SUM(btc_balance) query on the user_profiles table to determine the total outstanding balances. Earlier I had reviewed some of the site code to verify that indeed this table was being updated when deposits and withdrawals took place.”

Moreover, he made sure that none of the customer-specific private information was revealed.

To the question why he went to oversee the procedure, Mr. Hearne said: “The Bitstamp guys want to do this semi-regularly with a different observer each time. I was asked to do this, and as I now am self-employed, it made sense to go and visit them.”

Furthermore, he signified the importance of audits as it is a way to build trust and dispel rumors. But says that it’s still a bit too early to create standards, commenting: “There’s still a lot of variance in techniques and technologies being used, with new R&D still being done. Once things settle down some more, a standard way to audit exchanges would be useful indeed.”

The company has already undergone a few audits in the past. The first audit was made last year, and announced in March. Moreover,Nejc Kodrič, the Bitstamp CEO, said that his company want to undrgo quarterly audits in order to prove its transparency to its customers.

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