Published Aug 7, 2019 4:44:23 PM
Since Satoshi Nakamoto released the bitcoin white paper in 2008, the cryptocurrency industry has been constructing a decentralized financial system. But a decade later, one missing piece is still holding up progress.
The absence of secure custody, which represents the foundation of cryptocurrency infrastructure, has significantly slowed the development of the crypto-economy. Just as quickly as new platforms emerge and gain popularity, they become targets, and their weak groundwork is exposed as hackers siphon off the cryptocurrency under their protection.
While individuals, and the smaller funds that are already beginning to invest in the space might be comfortable with this risk, the institutional asset managers that hold most of the world’s wealth demand a solid foundation—with secure and transparent custody, and smooth relationships with regulators.
Institutions that can provide this custody will lead the new generation of ‘crypto whales’ into the digital asset market, making a bigger splash than ever before, and pushing the ecosystem forward to maturity.
While most exchanges struggle to defend private keys in cumbersome cold storage and hot wallets, Qredo eliminates the attack vector entirely—by never storing static private keys.
Instead, Qredo uses “just-in-time” keys that only come into existence once participants governing the custodial account approve the redemption request, and several decentralized parameters are met.
Even then, the “just in time” keys exist only for a nanosecond, reducing the attack surface to an infinitesimally small area.
In the worst case scenario—if the device with the Qredo Custody App on is lost or stolen in an unavoidable catastrophe or force majeure event—custodians are equipped with a USB recovery key, which contains a specialized version of the Qredo Custody App to act as a fail-safe disaster recovery device.
Find out more about how Qredo eliminates private key theft in our white paper.
While hacks and heists draw negative publicity to cryptocurrency, pushing institutions further back on to the sidelines, clashes with regulators have also created controversy.
To inspire trust with fiduciaries, crypto platforms must meet regulatory requirements with ease, which means keeping an open book of transactions, and fully complying with Anti-Money Laundering regulations.
On the Qredo network, all communications are signed by the sending and receiving parties and saved as part of an immutable permanent record. And just like the open blockchain, Qredo’s tech stack is fully transparent, allowing custody providers to instantly audit operations and collect the evidence needed to satisfy the demands of regulators.
Whatever range of information might be requested, Qredo is able to provide it securely, giving exchanges the easy interaction with regulators that allows new and differentiated product offerings to be rapidly launched and scaled.
From the perspective of users, this transparency is also advantageous, allowing
them to instantly receive cryptographic assurance of all operations, and verify—without the need for trust—that all assets placed within a segregated custodial account are aligned to the underlying asset’s ledger.
Privacy is difficult to find under the existing paradigm of private key storage. Multisig wallets, used by the majority of exchanges, require several parties to be involved in forwarding funds—introducing privacy, compliance and service availability risks. Similarly, cold storage wallets present similar security and privacy risks when the funds are moved.
On the Qredo Custody Network, as soon as the redemption workflows are completed control over the custodial account is granted entirely to the owner of the assets. They then have sole knowledge of where funds are sent, because no other party is involved in the process.
With a custody solution that is secure, transparent, and easily made compliant with existing and new regulations, crypto exchanges will be fully equipped to welcome the next generation of investors into the space.
On this strong foundation, the next wave of cryptocurrency infrastructure will be built—with new products and services to bridge the worlds of legacy finance and cryptocurrency that are able to serve the most conservative of institutional investors without compromising the vision of decentralization.