They say that a quarter of all BTC is lost due to people carelessness and foolishness.
One guy bought 70 BTC for $100 in 2011 and kept them on his ancient PC which broke down eventually. In 2013, when the price of 1 BTC reached $1000, the guy understood that throwing away that “golden” PC was the most expensive mistake he has ever made.
The most awful crypto fail belongs to James Howells. In 2009 he mined 7500 BTC storing a private key on a hard drive waiting for BTC to grow. And it did (I mean BTC) but James mistakenly threw out the hard drive, and all his efforts ended up in a general waste bin.
And such stories are numerous only the numbers of BTCs differ which makes people think that a quarter of mined BTC will never be traded again.
This February we learned that QuadrigaCX users would never receive most of their BTC, BCH, LTC, and ETH. Why? Because Gerry Cotten, founder, and chief executive officer of QuadrigaCX, was the only one who had access to exchange’s cold (offline) storage wallets and he suddenly went to long rest. Exit scam, carelessness, or something else? Let’s dig deeper.
QuadrigaCX Case
QuadrigaCX is the largest bitcoin exchange in Canada. At the end of January, a message appeared on the website that went:
“For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us. Unfortunately, these efforts have not been successful.”
The reason as you might have already guessed was the sudden death of exchange CEO, Gerry Cotten, mentioned above.
With all the suspicion to trade volume manipulations on crypto exchanges, it’s fair to assume that the whole situation is an exit scam and the death of the founder is the only reason to fulfill evil intentions finally. Some users believe that QuadrigaCX never had such pool of funds and cold wallet reserves.
Exit scam — a fraudulent practice by founders and managers of crypto projects who then vanish with investors’ money.
Either exit scam or a foolish blunder, the outcome is that now-inaccessible physical device makes thousands of exchange users never be able to receive their investments back.
What is a multi-signature wallet and how it could save QuadrigaCX reputation
Multi-signature (multisig) wallet — a type of wallet that requires more than one key to authorize a transaction.
A multi-signature wallet works like a safe which needs multiple keys to operate. This type of wallet is used mainly for two purposes:
- To ensure more security for a wallet and prevent a human error.
- To create a more decentralized wallet which can be used by one or more people.
Usually, the keys are issued to a number of owners to manage the risk. To perform any transactions all parties or specific share of them need to sign off on it (depends on the wallet and its terms). Thus, when a hacker aims at stealing funds, it’s hardly possible for them to carry most of the private keys. Moreover, if one of the owners loses the private key, he and she can always turn to a private backup key to avoid QuadrigaCX-like cases.
Multisig cold wallet — Rokkex competitive advantage
Learning from competitors mistakes, Rokkex aims to develop a safe and trustworthy crypto exchange.
When talking about safe, it means all-inclusive and professional approach to cybersecurity. The crypto industry was yet immature and unregulated, so we at Rokkex aim to follow the standards so our users won’t be worried when trading with us. So, yes, Rokkex will use multi-signature wallets for cold storage.
3/4 of the key holders will be needed to sign the transaction, allowing the preventative measures to ensure such incidents as with QuadrigaCX would not happen.
Rokkex will reduce the use of hot wallets and store our user’s funds in multisig cold wallets. The idea is to increase the ease of liquidity while not compromising on security. Also, we will want to prove, that we do have the liquidity needed. Thus, we’re planning to claim for Liquidity CERtification that will give our users
- Proof of authentic liquidity free from volume manipulations.
- A quantified liquidity metric as a measure of our sufficiency
- Good faith in Rokkex providing the best trading experience possible.
Afterthought
The story which happened to QuadrigaCX’s users is unacceptable. Exit scams should have been left in ICO times instead of taking place in 2019 when crypto is finally looking for regulations and fair market games.
Rokkex will look for the best cybersecurity and liquidity options to grow and develop in a positive pace with the industry.
At ROKKEX, we take security extremely seriously and our crypto exchange is built on ‘Security First’ principle. We want to share our expertise with the broader public for the world to become happy, safe, and wise :)
If you have any ideas and suggestions, contact us at
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