The recent unfortunate events at Canadian Digital Asset Exchange, Quadriga CX, have brought to the forefront one of the possible security risks surrounding the use of cold wallets. QuadrigaCX CEO, Gerald Cotten, died holding all the passwords to unlock millions in customer coins. Cotten exclusively held all the ways in which to access the digital wallets, an application that stores the keys to send and receive cryptocurrencies. Unfortunately, a story like this is not uncommon, as millions of Bitcoins are lost forever through theft, making Cotten’s security adherence reasonable, yet risky. Sole responsibility comes at a hefty price, in this case, a $200 million problem.
Code is law
When utilising blockchain technology, we see the price you pay for a decentralised system in QuadrigaCX’s issue. Cold storage wallets are the cryptocurrency industry standard for safely securing funds online and are a way of moving crypto assets off the trading platform and securely keeping them in an offline environment.
This process is very secure and requires a cryptographic key pair to access the crypto assets. If encrypted, the crypto assets cannot be obtained from the cold storage wallets without the passphrase. It is a single-key wallet which allows one user to spend their Bitcoins, with one signature for a Bitcoin transaction. Keys (the equivalent of a pin or password) for a single-key wallet are typically generated and stored on a single machine, using encryption to secure them while on disk.
At ChainEX, we’re all about mitigating the risks of safety threats while protecting ourselves and our customers. We have taken every precaution to ensure there is never only one person holding the keys. We use a very carefully designed multi-signature or “multi-sig” technology for our cold storage, which allows for multiple signatures to sign a transaction before it is broadcasted onto the blockchain. This prevents us ever being locked out of our bank vault! It also means that an individual can’t move the money into or out of cold storage without the consent or knowledge of the others, as well as a signing server, which allows us to divide the responsibility for possession of Bitcoins.
We implement tight security with our infrastructure. Our cold storage wallets are air-gapped, and our wallet servers and other servers are logically separated and protected by firewalls and separate networks for increased security. Our servers are only accessible over a secure virtual private network (VPN). Thanks to these measures, we have a secure way of recovering funds, and it ensures that we don’t run the risk of putting our spending power in the hands of one person.
Thanks to these measures, ChainEX has:
· A secure way of recovering funds;
· Eliminated the risk of putting our spending power in the hands of one person;
· Several layers of protocols; and
· Secure and accessible cold wallets
Therefore, our customers can deposit without fear of losing due to mismanagement and key man dependencies, and enjoy full transparency throughout the ecosystem.
For more information, visit https://chainex.io/.