Crypto Wallet Manufacturer Introduces New Tech to Outpace Cold Storage

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Crypto Wallet Manufacturer Introduces New Tech to Outpace Cold Storage

Bitfi cryptocurrency wallet set to shake up the way crypto holders store their tokens by introducing the new tech designed to improve cold storage, in fact, eliminating storage completely.

Crypto Wallet Manufacturer Introduces New Tech to Outpace Cold Storage

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Source: CoinSpeaker

Canadian Crypto Exchange Has Lost Access to its Cold Storage

Customers foolish enough to leave funds at the Canadian crypto exchange QuadrigaCX have a lot to be worried about. According to a post by the company’s board of directors, the platform has lost access to the digital assets it held in cold storage.
Whilst the exchange was only small in terms of active daily users, according to figures from Coinmarketcap, the news once again highlights the importance of users taking responsibility for storing their own digital assets securely.
Not Your Keys, Not Your Crypto
Less than a month after billionaire and early Bitcoin evangelist Trace Mayer held the inaugural “Proof-of-Keys“event as a display of monetary sovereignty, a Canadian crypto exchange called QuadrigaCX has committed the ultimate blunder – losing access to its own cold storage.

Let's start a new #Bitcoin cultural tradition.
An annual Proof of Keys Celebration on Jan 3rd to declare monetary sovereignty by withdrawing all $BTC held w/ trusted 3rd parties to software we control private keys & do network consensus.
Who is w/ me? https://t.co/sJhOYSjStH pic.twitter.com/ve9DBsQhh9
— Trace Mayer (@TraceMayer) December 9, 2018

The QuadrigaCX exchange went offline a couple of days ago. Maintenance issues were cited as the reason behind the downtime. However, it has since transpired that the story is goes deeper than routine work on the site.
According to a post by the QuadrigaCX board of directors, the crypto exchange is facing “significant financial issues” that have impacted the service received by its users. The Nova Scotia Supreme Court will appoint an independent third party, Ernst & Young Inc., to watch over creditor protection proceedings happening next month.
The note from the board goes on to state that efforts have been made to fix liquidity issues hindering the operation of the company. Then comes the really shocking admission – QuadrigaCX cannot access its own cold storage:
“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… Unfortunately, these efforts have not been successful.”
The post concludes by stating that QuadrigaCX will update its users following the hearing on February 5.
The number of QuadrigaCX users impacted by the monumental gaffe does not appear to be enormous since the exchange boasted less that $500,000 in exchange volume across all trading pairs over the last 24 hours it was active. However, numbers aside, the news could not have highlight the point championed by Mayer on Bitcoin’s 10th birthday any better.
Crypto exchanges are the riskiest places to store digital currency. They pose all kinds of dangers to users. As far as we are aware, the QuadrigaCX example is the first of a trading platform simply losing access to its own cold storage solution. Much more common is exchanges being hacked – recent examples include South Korea’s Coinrail and Japan’s Zaif.
Another risk to those deciding to cede responsibility of their own finances to an unregulated, largely unheard of company is posed by the exchanges themselves. Indeed, early crypto exchange Mt. Gox famously collapsed due to spectacularly poor management of customers funds.
Being almost entirely unregulated, there is very little recourse if one of these all-too-common occurrences is responsible for you losing your digital assets.
Traders have little choice but to leave some cryptocurrency on an exchange for long enough for it to be considered at risk. However, they can minimise the chances of losing funds by withdrawing after every session and only keeping a small percentage of their total holdings in an online hot wallet.
Meanwhile, investors, or holders, have literally no excuse to entrust their crypto to a potentially shady company that they know very little about the business practices of. Bitcoin and other digital assets have the potential to grant great freedom to the entire planet. However, with such freedom comes responsibility – chief of which is ensuring that you and you alone know the private key to your chosen crypto storage solution.
 
Related Reading: Japan Creates Regulatory Body to Prevent Cryptocurrency Exchange Hacks
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Coinbase Uses Electromagnetic Signal Blocking Tents to Secure Cryptocurrencies

It’s common knowledge throughout the cryptocurrency community the safest and most secure way for individual investors to store digital assets is via cold storage. This is either through a hardware wallet like the Ledger S Nano, an air-gapped Linux-based computer, or a paper wallet.
However, according to a new exposé from Wired, leading cryptocurrency exchange, San Francisco-based Coinbase, uses similar cold storage methods, albeit with a few extra advanced security techniques to ensure assets stay safe from cybercriminals.
Coinbase Private Key Generation Process is in Tents
Wired journalist Tim Simonite was invited by Coinbase to witness what he calls “an arcane ritual intended to bewitch Wall Street and help it fall in love with cryptocurrency.”
“I am transfixed by the plummeting signal strength on my phone as employees of cryptocurrency exchange Coinbase close the flap of the stuffy silver tent I’m standing inside,” he writes. “The fabric walls enclose a cubic space about 8 feet across and contain mesh that functions as a Faraday cage, which blocks electromagnetic radiation. By the time the tent is sealed, my connection to the outside world has drained away to nothing. Now the ceremony can begin.”
Because the private keys to digital assets are ironically kept safest when stored offline, and because Coinbase has “more than 20 million accounts and looks after billions of dollars worth of Bitcoin, Ethereum, and other cryptocurrencies for its customers,” the firm must take additional steps to prevent potential theft from occurring.
One such step, is using a Faraday tent, named after Michael Faraday who first discovered the underlying principles behind electromagnetic induction, diamagnetism, and electrolysis. The aptly named Faraday tent is a shielded tent designed to block electromagnetic signals from escaping and being intercepted by cybercriminals. It’s in this tent where the company securely prints the private keys for its investors.
Coinbase chooses a secure location to erect the tent at random, and runs a shielded power supply to reduce power fluctuations that could provide insight into what’s transpiring inside the tent to onlookers. Beyond that, there’s only a folding table, a lamp, a printer, and two laptops. One laptop runs a Linux-based operating system from a USB drive. The other, is a Macbook that Coinbase uses to print private keys transferred over from the laptop running Linux because, according to Zak Blacher of Coinbase’s security team, it’s “just way easier printing from a Mac.”
The process, which Philip Martin, Coinbase’s head of security, says “takes most of the day.” It begins with a coin toss to decide which laptops are being used in the ceremony and ends with Coinbase storing the freshly printed private keys in what Wired calls a “reimagining of the bank vault.” The laptops used during the process are destroyed after everything is completed to prevent data leaks.
Coinbase, who this year launched a custody product for institutional investors, hopes that by demonstrating its security techniques the firm can lure in sidelined investors. Brian Armstrong, CEO of Coinbase, explained “there’s a bunch of institutional money interested in the cryptocurrency space,” adding, “but they need a qualified institution to act as a custodian.”
Featured image from Shutterstock.
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