Coinbase presently manages around $270 million in assets belonging to its customers.
Coinbase is set to enhance the integration of its secure cryptocurrency custody accounts, referred to as Vaults, across a broader range of its offerings, including those within its expanding institutional custody sector. This announcement was made by Yehuda Lindell, the head of cryptography at Coinbase, during his presentation at the Science of Blockchain Conference held on August 8.
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The Vaults utilize a method known as multiparty computation (MPC) to secure transactions. This innovative approach involves dividing the private key necessary for transaction signing into multiple segments, which are then distributed among various parties. As a result, no individual party possesses complete authority over the key, thereby enhancing security.
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According to Lindell, the Vaults are not only currently in use but will also be incorporated into additional products offered by Coinbase, encompassing custody services, exchange functionalities, and beyond. This strategic move aims to bolster the security and efficiency of Coinbase’s services in the rapidly evolving cryptocurrency landscape.
The Vaults are structured to prevent any single points of failure that could allow an attacker to seize complete control of cryptocurrency assets in one decisive action. To achieve this, each key share is securely stored in a completely separate environment.
Lindell explained that there is a designated share for the offline environment, another for human approvers, and an additional share allocated for each MPC server. This distribution is crucial for maintaining security and ensuring that no single entity has complete control over the keys.
The primary objective is to ensure that keys are managed by distinct entities that maintain a robust separation from one another. Lindell emphasized that, ideally, the keyholders should never converge at any point during the entire lifecycle of a Vault, thereby enhancing security protocols.
The composition of keyholders can differ depending on the type of product. In the case of non-custodial products, customers typically act as signers. Conversely, for custodial products, Lindell noted that both MPC servers and human approvers are integrated within Coinbase, creating a layered approach to key management.
Coinbase has established itself as a prominent custodian of digital assets for financial institutions, managing cryptocurrency on behalf of nearly all issuers of spot crypto exchange-traded funds (ETFs). The launch of spot Bitcoin ETFs in the United States in 2024 has significantly contributed to this growth, with these funds now managing over $55 billion in assets, as reported by Yahoo Finance.
As of its earnings call on August 1, Coinbase reported that it currently oversees approximately $270 billion in customer assets. Over the past year, the assets under its custody have increased by around $80 billion, reflecting the growing trust and reliance on Coinbase as a secure platform for digital asset management.
Lindell emphasized the importance of security in the context of managing such high-value assets, stating that regardless of the protective measures in place, targets involving billions of dollars remain highly appealing to potential threats. This underscores the necessity for continuous evaluation and enhancement of security protocols to safeguard these significant investments.
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