Exchanges

Coinbase moved $5 billion in crypto as part of an upgrade it was worried would take a toll on the market

December 19, 2018, 12:59PM EDT

Coinbase, the cryptocurrency exchange, announced Wednesday the successful completion of an upgrade made to its cold-storage infrastructure. As part of the process, the firm migrated $5 billion worth of crypto from the old system (dubbed generation 3) to the new system (generation 4).

"Last week we successfully completed an on-blockchain migration of approximately $5 billion (as valued the week ending Dec. 7, 2018) of cryptocurrency from generation 3 to generation 4 of our cold storage infrastructure," a press release said.

According to Coinbase, that might be the largest migration of crypto in history. The $5 billion number represents 5% of all bitcoin, 8% of the total supply of ether, and 25% of all litecoin. 

The migration, which took place over several days earlier this month, opened Coinbase up to potential risks, the firm said.

"One of the risks we identified early on in the process was the potential for our migration to be mistaken for an exchange breach or a large trader preparing to sell a significant amount of cryptocurrency."

The firm thought about announcing that it would be upgrading its system in advance but feared hackers would take advantage of the shift. The firm made an announcement hinting at the maintenance in November without saying specifically what would be going on to quell anxieties. 

A person familiar with the new system told The Block that it would allow for Coinbase to more quickly add new assets to its exchange. Institutions were already making trades with the new system, but now all of Coinbase's activity will be on generation 4. Coinbase has notably listed a slew of new assets recently, including AI, GNT, MKR, and ZIL.

"This system protects against key loss, key misuse (including insider threat and application level attacks) and supports world class key governance and audit while being currency agnostic," the blog post added. "That means we can store any cryptocurrency using the same system, without making compromises in the level of security provided to any single cryptocurrency."