When companies deal with self-storage and private keys there are no resets, a lost key is gone forever. Many crypto-asset hacking incidents in the past few years have highlighted that the domain expertise it takes to build crypto custody solutions, and design effective governance controls, is not commonplace in the traditional financial services industry.
Different processes and assumptions are needed to design custody solutions for digital-only assets. Cryptocurrencies are created and managed using specialized technologies that come with their own unique considerations for their storage and security. Users should be aware they may encounter several challenges.
Private key management problems
Difficulty protecting the private key
Hacking and losing their private keys are always users’ biggest problems when storing keys. Consider the complexity of managing passwords and the frequency at which each user may have their password reset. When dealing with self-storage and private keys there are no resets, a lost key is gone forever.
Self-custody, like keeping cash in your physical wallet or locked in a drawer, poses its own risks. There is no third-party involved to manage that risk (or your funds) if you lose access to your keys, experience a destructive event like a fire or power outage, or pass away unexpectedly.
Delegate responsibility but lose autonomy
Many enterprises lack the knowledge or capability to manage their own keys, so they will choose to outsource or delegate this task to someone else who has better knowledge such as a custodian. However, by doing this, enterprises not only hand over the responsibility to third parties but also lose full control of their own assets. Using a custodian will impose limitations or dependencies that may impact the response time to the market.
Cold wallets are very safe but inefficient
Cold wallets significantly lower the risk of unauthorized transfers through physical security and role-based control over key access. However, offline solutions are generally slower to execute on instructions because their key-storage systems can only be accessed at their physical locations.
In view of this, Custonomy provides another option in managing the key thanks to its proprietaryr key management solution by allowingenterprises to co-manage their keys with multiple parties, both internal and external. With this new way, enterprises can manage their keys as well as enjoy the governance processes that are imposed by third-party custodians and retain their autonomy.
Custonomy provides a self-managed wallet that offers third-party assistance and related institutional controls and protections. This allows institutions to control their holdings, but also to get assistance of assurance and institutional protection from Custonomy.
The flexibility of Custonomy’s solution enables enterprises to fulfill regulatory requirements and anticipate future compliance changes. Using Custonomy’s product, it is easy to scale companies and stay relevant when embracing innovation.
In conclusion, Custonomy has four unique features:
- First, with the newly developed functions of the MPC technology, Custonomy can achieve more refinements by using its patent-pending technology. Custonomy enables customers to secure their crypto assets with flexibility by eliminating the private key concepts. Custonomy and its users independently generate key shards that will be used for transaction signing. The private key will never be reconstructed in one place which eliminates the risk of a single point of compromise.
- Second, Custonomy can use the same technology to support all kinds of assets, both crypto currencies and NFT. We support all the chains with ECDSA and EdDSA signature standards, which represent more than 90% of the existing chains standard. Assuming we support the main chain, we will also support all the tokens on that chain (L1 L2). The chains that we support include , , , BSC, , and major EVM chains.
- Third, Custonomy enables customers to have complete autonomy without compromising security, while ensuring the company has flexibility to control their assets and respond to the market. Its solution also comprises an authorization workflow engine that allows users to define different levels of policy including but not limited to address, transaction, time-based, and user-based rules. The MPC protocol will only be executed for transaction signing when all the user-defined policy rules have been met.
- Last but not least, Custonomy is a Hong Kong-based company that enjoys language and location advantages in terms of efficiently serving Asian countries and the global market. This means we are able to act locally, but can think globally.
The most notable feature is the unique, patent-pending MPC hierarchical threshold key management scheme. Based on the Hierarchical Threshold Signature Scheme (HTSS), Custonomy has developed a hierarchical threshold key management scheme that allows multiple tiers of threshold signing authorities, the first-ever of its kind that has ever been introduced in the market. The multi-layer Threshold Scheme controls a set or a particular secret share that is mandatory and cannot be bypassed. All these desired properties are embedded mathematically in the cryptography of the MPC protocol. That makes this key management solution perfect for different use cases.
HTSS is a solution that meets all main requirements proposed by enterprises. The concept originated from academic research which studied the problem of threshold secret sharing in groups with a hierarchical structure. The main principle is that the secret is shared among a group of participants and partitioned into levels to work against a single address virtually.
Another flexibility offered by HTSS is the possibility to enable systems to have signing power to process the transaction. For example in the second level of the scheme, signing power is given to KYC, AML, and Anti-Fraud. That makes all transactions more automated, compliant, and secure. There are several levels in the signing scheme based on a company’s needs. And the threshold for each level can be customized by an enterprise.
To sum up, Custonomy’s HTSS allows an enterprise to add a tier of regulatory nodes as mandatory to ensure full compliance of transactions. And the beauty is that everything can work natively as a usual address in the public chain. Unlike multi-sig, Custonomy’s solution doesn’t leave any footprint of the policy and signing rules in the blockchain. Lastly, by using the threshold signing, Custonomy prevents fraudulent key usage, the primary problem of crypto protection. Therefore, this solution not only provides an ultra-secure key management platform but also revolutionizes the way the enterprise complies with crypto regulations - by just using the key. No add-on, no plug-in. Pure mathematics.
Who is behind Custonomy?
The partnership between Custonomy and Holdex aims at providing value to crypto startups and project owners by completing and enhancing the respective product offerings: advisory and accelerator program by Holdex together with a secure MPC key management solution by Custonomy. Crypto start-ups will have access to Custonomy enterprise-level MPC custody solution where they can securely engage with their digital assets and at the same time they will be able to launch their projects thanks to Holdex expert guidance in the industry . The forthcoming NFT support and smart-contract lifecycle management will also make it possible for project owners to keep their NFT collections and the related smart-contracts secure both for them and for their end customer thanks to Custonomy MPC hierarchical key management structure.
The collaboration between Holdex and Custonomy will underpin and drive forth development efforts in Hong Kong. We are both committed to working together to promote a safe and smart environment in the crypto ecosystem through co-branded marketing activities running. With this new partnership,
Custonomy and Holdex share a common goal to raise awareness of quality investment opportunities.
Holdex is a Hong Kong-based company well known for the quality of the services provided since 2017.
Holdex’s co-founder and CEO Vadim Zolotokrylin commented: