In an attempt to address the price volatility of Bitcoin, Bitreserve recently launched as a Bitcoin storage service that keeps users' funds in the form of fiat. Bitreserve does this by immediately market selling any incoming deposits, essentially locking in the fiat value of the credited funds. Users are entitled to the locked fiat amount in Bitcoin upon withdrawal, thus users may lose or gain BTC due to volatility.
The company claims to have real time transparency, utilizing what they have coined as "poof-of-solvency". Their website states: "Anyone at any time can confirm that the aggregate amount of value in our members' wallets is matched with assets in our full reserve." However their status page only displays a self published list of the company's total assets and liabilities. This page also links to two documents the company trademarked as ReserveChain[tm] and ReserveLedger[tm]. The former is a list of all Blockchain transactions entering or exiting BitReserve's network, while the latter is the company's internal ledger of trades on the market. The company also states an independent accounting firm will audit both documents every fiscal quarter.
Unfortunately the company has yet to publish a proof-of-control of any of their depository Bitcoin addresses, which could be done simply by providing verifiable signatures from these addresses. Additionally the ReserveLedger[tm] requires independent auditors for verification, and even with such safeguards still has no definitive way for the public to verify authenticity of the transactions.
Bitreserve, like others1, has yet to disclose their liquidity source. The company charges a flat 0.45% commission fee on incoming deposits, stating they are able to offer low fees by acting as the counter party. This model could be abused during highly volatile price movements upward, the company has the ability to profit on their users by selling deposited bitcoins into their own bids as the price increases.
The operator of Bitreserve is CNET founder Halsey Minor, who sold the company to CBS for a reported $1.8 Billion and shortly after declaring bankruptcy due to bad investments in real estate.
Bitpay, Coinbase, etc. ↩