Michael Saylor Criticizes On-Chain Proof-Of-Reserves For Security Risks

Michael Saylor, the Executive Chairman of Strategy, has voiced strong opposition to the practice of institutions publishing on-chain proof-of-reserves, emphasizing the significant security risks involved. Saylor's remarks were made during an event held on the sidelines of the Bitcoin 2025 conference in Las Vegas, where he was asked about the adoption of this transparency measure by institutions. He described the current method of publishing proof of reserves as insecure, stating that it dilutes the security of issuers, custodians, exchanges, and investors alike. According to Saylor, this practice is not only ineffective but also poses a substantial risk to the security of the entities involved.

Saylor did not provide a definitive answer when asked whether Strategy would publish its own proof-of-reserves. He was questioned by Mitchell Askew, the head analyst at Blockware Solutions, who sought clarification on the firm's stance on this issue. Saylor's response underscored his belief that on-chain proof-of-reserves is a flawed approach, citing security risks and the irrelevance of such measures without comprehensive auditing of liabilities.

Proof-of-reserves are a common practice among crypto exchanges, serving to verify that companies hold sufficient crypto reserves to cover customer deposits. They also confirm that other entities, such as crypto-tracking exchange-traded funds, hold the required amount of crypto for the funds. Saylor acknowledged the lessons learned from the collapses of crypto exchanges like FTX and Mt. Gox, but he maintained that proof-of-reserves is not the appropriate measure for institutions. He argued that publishing wallet addresses could compromise the security of an institution, making it vulnerable to tracing and potential attacks.

Saylor's concerns are rooted in the potential for malicious actors to exploit the information disclosed through on-chain proof-of-reserves. He suggested that artificial intelligence could identify numerous security problems associated with publishing wallet addresses, which could undermine an institution's security over time. This perspective highlights the delicate balance between transparency and security that institutions must navigate in the crypto industry.

Following the collapse of FTX in November 2022, many crypto exchanges, custodians, and exchange-traded fund issuers began publishing their proof-of-reserves to establish transparency and prove that they hold enough assets to back customer deposits. Industry players such as Binance, Kraken, OKX, and Bitwise have adopted this transparency measure. However, Saylor noted that proof-of-reserves often only show one side of the picture, revealing what the company holds but not what they owe. This partial disclosure can create a misleading impression of an institution's financial health and stability.

Strategy, under Saylor's leadership, is the world's largest corporate Bitcoin holder, with a substantial amount of Bitcoin on its balance sheet. This position underscores the significance of Saylor's views on security and transparency in the crypto industry. As the debate over on-chain proof-of-reserves continues, institutions will need to carefully consider the implications of their transparency measures and ensure that they do not compromise their security in the process. The evolving landscape of the crypto industry requires a nuanced approach to balancing transparency and security, and Saylor's insights provide valuable perspectives on this critical issue.