Custodians: Seeking Speed, Convenience, and Safety
Cryptocurrency investing-buying and selling digital assets on blockchains-isn’t easy. In fact, it’s a real pain, even for technical minded users. Worse yet, high dollar cryptocurrency accounts held on a personal device add considerable risk. Custodial solutions can’t come soon enough.
Unfortunately, trading large sums of tokens using convenient third party tools involves the risk of accessing private keys too slowly, or the one’s risk of keeping private keys in a warm or hot wallet. These wallets, connected to the internet, can be targeted by attackers. And while hardware solutions like Trezor and Ledger have made keeping one’s private keys safe more user friendly, such tools are still for the technical in nature.
Speed. Convenience. Safety.
Pick two.
This is one of the major problems with cryptocurrency today. Current custodial solutions are barely adequate for consumer use. The ease of anonymously trading stolen tokens creates honeypots out of centralized exchanges. (Honeypot is a computer security term for a website that attracts criminals.)
Mt Gox is the most infamous hack, but the past year has seen a number of smaller hacks that have resulted in lost cryptocurrency to thieves.
Private Keys: a Recap
Private keys are the heart of cryptocurrency. Any time Bitcoin or another cryptocurrency is sent to another user, the private keys are used to prove to the blockchain (and the world) that the sender has the appropriate number of Bitcoins to send.
Private keys have never been “hacked”. While careless users have thrown away hard drives containing private keys, private keys are currently impossible to guess. The biggest hacks that have taken place in cryptocurrency happened because people kept their Bitcoins on a centralized exchange, which did not adequately protect its private keys (or allowed users to spoof other users and withdraw from their account).
The current state of custodians is slightly better than abysmal. Nobody in the community suggests keeping one’s coins on an exchange…ever. Until exchanges prove that they are capable of offering all three of the above features: speed, convenience, and safety, they will remain an inferior consumer product.
Custodians Must Be Better
There are a couple of solutions to this:
- Insurance
- Better Wallet Software for Custodians
This is not a blog about insurance solutions, so we’ll skip #1 and go straight to #2: Better wallet software.
Better wallet software has been difficult. In general, the more complex a particular coding is, the more likely it is to have unexpected errors or bugs. Parity found this out in two of their multisig wallets in the past two years, and lost 153,307 ETH from a hack, followed by a frozen 500,000 ETH due to a bug (possibly done with intent).
Furthermore, a successful startup might provide solutions that work for a dozen investors, but scaling up to millions creates serious problems. Any successful custodial solution must be scalable-it must be able to ramp from dozens, to thousands, to millions of customers.
Instant Access, Top Security
Hedge is creating a platform that offers 100% reliability with dedicated hardware security modules for every client. Each client has cloud access 24/7/365. Scalability is deployed with over 1000 partitions per device, strong two factor authentication, and other security features designed with speed, convenience, and safety in mind.
What Hedge Offers
Security:
Hedge leads the industry in providing secure wallets with proprietary best in class distributed cold storage practices. The keys to your funds never touch the internet and cannot be stolen by hackers. There is no single point of failure that can jeopardize your fiduciary.
Applications:
Hedge offers application interface solutions to make your apps work with our apps. Small regional bank looking to compete? Incorporate Hedge’s APIs into your app and give your customers the ability to buy and sell bitcoin through your institution.
Access:
Hedge is the only firm in the industry that gives you 24/7 access to your funds. We net settle transactions in a proprietary process that maintains the safety of keys in cold storage, but with near real time trading.
Let Hedge manage blockchains; you manage your clients.
