Published Mar 31, 2022
By Qredo Team

The Qredo vision: Decentralized custody and beyond

Most people understand Qredo in one of two ways: either through colorful comparisons to existing technology — or as a brand new innovation.

This post takes the latter approach; making sense of Qredo from the ground up.

Read on to learn about Qredo's unique design philosophy,  the critical components of the network, and the use cases that they collectively enable.

The vision: decentralizing private keys

Qredo's design philosophy is rooted in the realization that the two most significant problems plaguing the crypto market — poor security and fragmented liquidity — stem from a single quirk: the centralized management of private keys. This has made it difficult for institutions to enter the ecosystem, and enabled an extensive catalog of hacks.  

The antidote — decentralizing the management of private keys — requires a radical reimagining of crypto infrastructure.

Qredo rises to this challenge with a fusion of multi-party computation and blockchain that harks back to Satoshi's original ethos of trust minimization. This offers a new way of managing private keys, and unlocks multiple use cases across the crypto ecosystem.

The Qredo stack 

In three layers, the Qredo stack provides the functional building blocks of custody, cross-chain settlement, and communication.

1. Decentralized multi-party computation (dMPC)

At the heart of Qredo is a new method of managing private keys in a decentralized way.

Everything Qredo makes possible is driven by this unique innovation, which we call decentralized multi-party computation (dMPC). This replaces private keys with MPC nodes, which are geographically distributed and controlled by blockchain consensus via the Qredochain. 

Through this process, the private key — which represents a single point of failure that is cumbersome to handle and vulnerable to theft — is effectively transformed: it becomes a flexible governance layer that can be divided and distributed to fit whatever organizational requirements are needed — without any loss of security or asset accessibility.

2. The Qredochain

The Qredochain turns a simple MPC custody solution into a cross-chain, cross-platform, settlement network.

This Layer 2 blockchain acts as an asset registry, recording the ownership of assets secured by the MPC. In turn, this fortifies the security of MPC by incorporating decentralized consensus into the signing process.

The result is the ability to instantly transfer assets between blockchains, platforms, and protocols on the network by moving ownership rights — leapfrogging the settlement delays, privacy issues, lack of interoperability, and fees of Layer 1 chains.

3. Communications network

Atop the Qredochain and dMPC will sit a separate communications network.

It will enable information such as metadata to be securely attached to transactions, and can handle everything from the transfer of compliance metadata packets, to machine-to-machine communications, and audit trails for regulated pre-trade communications.

The Qredo stack described provides the key functional building blocks of custody, cross-chain settlement, and communication, which power a proverbial swiss army knife of decentralized digital asset services.

Qredo use cases 

Custody 

The Qredo Wallet offers decentralized custody, backed by the security and governance of dMPC. From the Wallet, instant settlement between blockchains, exchanges, and protocols on the Network is provided via the Qredochain.

 #TheNetworkIsTheVault

Other apps — such as MetaMask Institutional — can also plug into Qredo Wallets for secure governance and private key management. 

Computational Custody

As distributed, standalone infrastructure, Qredo will enable sophisticated digital asset management, without reliance on third party custodians or manual human approvals. All actions can be based only on the laws of math, with  transactions automatically and independently assessed according to specific criteria — such as size, parameters, origin, or destination — without human oversight. 

It will be possible to simply connect via API for scalable governance, rapid-fire automated trading, and complete control over your digital assets with no counterparty risk. 

Trading via atomic swaps

Qredo's interoperable Layer 2 network enables instant cross-chain atomic swaps

Asset ownership is transferred on the Qredochain, without any delays waiting for transactions to be confirmed on the underlying chain, or any need to pay miner or gas fees to transact.

This critical swap mechanism enables peer-to-peer trading on Qredo Liquidity Hub (coming soon!).

Bridging (without wrapping)

Through atomic swaps, assets deposited on Qredo can be bridged between supported chains — without the counterparty risk of wrapping.

Instead of sending assets to the cold storage reserves of a custodian, as with wrapping, funds deposited on Qredo are sent to an address secured by dMPC.

The ownership rights to assets can then be transferred instantly on the Qredochain, creating a layer of cross-chain liquidity that will allow assets to be bridged without destroying the central value proposition of cryptoassets: trustlessness.

Travel Rule compliance

Traditional financial institutions use SWIFT to send and receive information such as money transfer instructions or compliance data.

The crypto ecosystem has no such shared communication layer, which makes it difficult to comply with regulations such as the Travel Rule.

Qredo’s communications network supports the sending of metadata, enabling applications such as the Qredo Travel Rule solution. This unique compliance tool makes it easier for digital asset companies (or Virtual Asset Service Providers) to  comply with emerging regulations.

Derivatives and tokenization

When cryptoassets are deposited on Qredo, synthetic assets are issued on the Layer 2 network to reflect the collateral secured by MPC on the underlying chain.  We call this process crystallization, and it enables the creation of derivative tokens, such as stablecoins, that are not tied to one exchange, or subject to counterparty risk.

The #QredoNetwork effect

Supported by token incentives such as QRDO custody mining, each new use case drives the network effect, attracting more users and liquidity.

To learn more about our plans to realize the Qredo vision, see the roadmap.