A New Approach To Crypto Asset Management
LGO’s mission is to create a fair and ideal environment for institutional investors and other large investors to manage and invest in cryptocurrencies and digital assets.
But, as things stand, the structure of the cryptocurrency universe doesn’t allow them to buy bitcoins and other cryptos on current exchanges. And one of the weak links of these cryptocurrency exchanges remains the wallet.
Current problems
A cryptocurrency wallet enables users to send and receive bitcoins and monitor their balance. In fact, cryptocurrencies don’t get stored in any single place or exist anywhere in any physical location. All that exists are records of transactions stored on the blockchain.
To be able to unlock the funds, the private key stored in the user wallet must match the public address it is assigned to. The best practice is to use a secure device that permits to deport the wallet to an integrated smart card associated with a software component encrypting the private keys. Keeping the private key on a disconnected/offline hardware device (“cold storage”) is the best solution to protect the customers’ assets.
However, there are still important gaps that exchanges have not covered to ensure a satisfactory level of security for investors. The most important of which is ensuring the safety of the clients’ funds
Making LGO a key player in the market will first be achieved by providing a reliable solution that will prevent cryptocurrency thefts and keeping the funds fully safe.
Can someone steal cryptocurrencies on LGO? If a hardware wallet is lost or stolen, can I retrieve my cryptocurrencies? Are my cryptocurrencies 100% safe?
A reliable security approach
As highlighted in one of our last post, LGO Exchange makes users’ funds security a priority, in particular by using a multisig wallet.
LGO Exchange offers a new way for users to manage their cryptocurrencies. For each client, LGO creates and proposes 2 different wallets: the storage wallet and the trading one.
Both wallets are 2-of-3 multisignature wallets: for each one, three keys exist, two of which are necessary to move the funds out of the wallets. Clients will have two different wallets to separate their trading activity on LGO from the storage of their crypto.
Storage wallet
The storage wallet will offer a total flexibility to clients. Parties involved in this multisig wallet are the client, LGO and the trusted third party.
On this wallet, clients have full control of their assets and can manage their transactions freely. The client is the only one able to initiate a transaction from the storage wallet.
In the unfortunate scenario where clients lose their key to the storage wallet (stored in a hardware wallet), clients will be able to retrieve the “backup” key held by the trusted third party.
The process in case of loss or theft is very similar to what happens when someone loses its credit card:
1The first action to do is to report the matter to LGO team or the trusted tier and our system will instantly stop all activities associated with this private key. It means that any authentication will be rejected and the wallet will be frozen. In case of loss or theft, user will have to do the same thing as when his credit card is lost or stolen.
2 After checking the situation, LGO and the trusted third party will sign a new transaction (2 of 3) to move the wallet to a new one. (NB:the trusted third party is not allowed to sign any transaction without the express permission of the user or a court order.)
3Users will have a new and dedicated blockchain address where they will be able to store and retrieve their crypto assets. This access will be available through a hardware wallet — just as a new debit card gives you access to your checking account.
Notice that LGO is not able to ask access to the backup key. LGO is only informed when the user requests it from the trusted third party in case of loss/theft, death of the user or when the user wants to stop using LGO.
Trading wallet
The trading wallet is dedicated to the clients trading activity on LGO. The funds stored in this wallet are the funds which will be tradable on LGO. Here again, the trading wallet is a 2-of-3 multisignature wallet where the client and LGO both hold a key, and where the third key is held by a clearing firm.
“A clearing corporation is an organization associated with an exchange to handle the confirmation, settlement and delivery of transactions. Clearing corporations fulfill the main obligation of ensuring transactions are made in a prompt and efficient manner.” — Investopedia
Clearing firms are highly regulated and are used to process routinely millions of transactions. Their role is to:
- Custody one of the keys of the trading wallet
- Handle the confirmation, the settlement and the delivery of the transactions
This setup is a complete innovation in the cryptocurrency space: LGO is not custodying any assets, and thanks to the 2-of-3 multisignature feature of our clients’ wallets, their funds are at no time at risk of being lost or stolen. This is a unique and secure transaction management system that we are deploying on the exchange.
As a result, clients will be able to focus on buying and selling cryptocurrencies without to worry for the safety of their funds.
Everything is under control
In any circumstances and in both wallets, no one can steal crypto assets or make a malicious transaction since the client will have warned a loss or a theft.
Without dwelling on the nightmares of the past, people still have in mind Mt. Gox and we all know what kind of disasters a fully centralized exchange can lead to. LGO exchange has not and will never have sufficient control on clients’ asset to make any non authorized operation. Neither LGO nor the trusted third party can steal the funds because both need to sign transaction. And if either the third party or LGO are out of service, clients have always to retrieve their funds from their wallets. Client is the sole arbiter and always maintains control of the situation.
Investors will experience freedom in managing their cryptocurrencies and at the same time, a real peace of mind by benefitting from a strong protection of their assets.
We are proud to announce that LGO has created a new crypto-asset management framework, a great step forward which will allow for a renewed confidence in the market.
When it comes to institutional investors, LGO Markets is a much more reliable counterpart than any other cryptocurrency exchange like Coinbase, Binance or Kraken, as we provide much more safety and freedom in trading and storing cryptocurrencies.
About LGO
LGOs Exchange (https://lgo.exchange) is a demonstrably fair and premium exchange for institutional investors. It incorporates a decentralized ledger within its proprietary centralized platform in order to guarantee the inalterability, temporality and transparency of the order book and ensure a fair trading environment.
