Published Jul 26, 2023
By Qredo Team
Take Secure Self-Custody of Your Assets with Qredo Vaults
The digital asset landscape has quickly grown into a financial revolution, creating a persistent need to better secure and manage digital assets.
Traditional methods of handling these assets have often revolved around either hot wallets used in-browser, or cold wallets which are typically hardware devices kept offline and connected to a computer via USB.
While hot wallets offer the benefit of readily accessible funds through internet connectivity, they leave assets vulnerable to online threats. Hardware wallets, on the other hand, provide more robust security due to offline storage but consequently limit access, compromising convenience.
Qredo offers a truly unique technological solution to this dilemma, distributed multi-party computation (dMPC), which provides a secure, distributed trading and settlement solution that overcomes the limitations of conventional hot and cold wallet systems.
Thanks to an extensive upgrade to the Qredo platform, you can now take even more secure and complete custody of your own digital assets in your Qredo Vault.
The conundrum of hot wallets in digital asset management
Hot crypto wallets have carved out a significant niche in the digital asset landscape, serving as online repositories for digital assets. Yet the convenience these wallets offer is marred by their vulnerability to security breaches.
A case in point is the 2020 KuCoin hack, which exposed security loopholes and led to the theft of approximately $281 million in various cryptocurrencies.
While hot wallets enable immediate withdrawals, ideal for small purchases or frequent transactions, they are susceptible to such security breaches. An infamous example is the 2012 Bitfloor hack, where hackers exploited a stored private key on an unencrypted hard disk partition, making away with 24,000 BTC, equivalent to around $250,000 at the time.
Hardware wallets: The crypto world's traditional safe houses
Cold storage via hardware wallet is a highly secure storage solution, generally securing private keys locally, and entirely offline. However, instances like the QuadrigaCX lockout highlight potential pitfalls. The sudden demise of the exchange's founder left assets stored in cold storage inaccessible, underlining the need for robust governance policies. Cold wallets can also be lost, as can locally stored seed phrases used as backups.
Striving for balance: Hot and cold wallets in crypto portfolio management
In light of the pros and cons of both hot and cold wallets, many digital asset firms opt for a blended approach, utilizing both wallet types in their crypto portfolio management strategies. Such strategies often employ multi-signature schemes for enhanced governance. Still, even these tactics have their shortcomings, as evidenced by the Parity Wallet freeze incident. Around $280 million was accidentally frozen due to a flaw in the wallet's multi-signature contract.
Redefining crypto asset management: Qredo Vaults' secure self-custody
With a focus on self-custody and improved security protocols, the new Qredo platform's Qredo Vaults offer a unique blend of control and safety that's unattainable even with a combination of traditional hot and cold wallets.
The use of distributed multi-party computation (dMPC) technology for key distribution eliminates the need for local key storage and effectively establishes the network as a vault in itself. This offers unparalleled security, all accessed within one easy-to-use interface.
With new features to the platform upgrade such as enhanced governance controls, and a Viewer role for auditing and review, Qredo is now your one-stop-shop for seamless control of your digital assets across numerous blockchains.
Qredo Vaults are designed for compatibility with multiple blockchains, allowing users to tap into the vast DeFi landscape with better speed and efficiency, replacing the need for a clutch of different wallets across different chains. All this whilst retaining secure custody of your own assets, with better security in point of fact, than if you had them in a hardware wallet.
The new Qredo platform features a customizable governance model, granting users the freedom to establish policies, designate roles, and oversee access permissions according to their specific needs.
With the ability to transfer and swap digital assets across chains, Qredo users can now capitalize on the blockchain ecosystem's full potential. This, along with the 360° portfolio tracker, allows users to monitor their assets effectively, providing increased visibility for smarter investment decisions.
Together with Qredo's commitment to decentralized key management, this creates a synergy of usability and security that has made Qredo a preferred choice for major partners like ConsenSys Mesh.
Hot and cold wallets versus Qredo's dMPC
Hot and cold wallets have several inherent limitations, exposing users to unnecessary risks, restricting accessibility, resulting in high fees, offering limited interoperability, and hindering participation in DeFi activities.
In contrast, Qredo's dMPC approach provides a range of advantages:
Security: Unlike hot wallets, which are always online and hence prone to theft, and cold storage options, which can be lost or stolen due to human error, dMPC circumvents single points of failure. Qredo's security is so reliable that it is covered by Lloyds of London insurance.
Accessibility: Implementing a multisig co-wallet strategy, where keys are spread across the organization, can cause withdrawal delays. The new Qredo platform enables immediate transfers between various parties on the Qredo Network, with funds as accessible as biometric authentication allows.
Cost: Managing digital assets often comes with costs, whether investing in hardware or subscribing to high-priced third-party services. Large multisig transactions on underlying chains can further exacerbate costs. In contrast, Qredo offers a zero-fee solution for holding funds on the Qredo Network.
Interoperability: The number of blockchains supporting on-chain multi-sig transactions is limited. These schemes are confined to assets on their specific chain, requiring firms dealing with multiple assets to have multiple solutions. Conversely, Qredo's dMPC enables one custody solution for multiple assets across numerous blockchains.
Access to DeFi: Cold storage isolates assets from the DeFi ecosystem, limiting on-chain activities like governance and staking. Qredo enables institutional-level DeFi access through MetaMask Institutional, as well as leading market integrations via WalletConnect and Sui Network.
Compliance: Unlike hot and cold crypto wallets, which often require additional solutions for regulatory compliance, Qredo's Travel Rule solution greatly simplifies adherence to regulations. Portfolios can also be thoroughly reviewed or audited directly, via the Viewer role.
Governance: Qredo's dMPC integrates compliance and governance directly into custody, allowing flexible policy customization without reliance on multi-sig, in contrast to the inflexible, basic governance of multi-sig.
Auditing: Multiple wallets for different assets can complicate auditing processes, making it hard to meet stringent regulatory requirements. Qredo's dMPC records all transactions on its Layer 2 blockchain, providing an unalterable record of all transactions on the Qredo Network.
Let's take a look at a key infographic exploring the differences between hot wallets, cold storage and Qredo Vaults in more depth:
dMPC: A new era of crypto custody and DeFi wallet security
By harnessing dMPC technology, Qredo is leading the way towards more secure and sovereign management and storage of digital assets, establishing new standards for DeFi wallet security. With private keys distributed in shards across our Layer 2 Qredo Network, single points of failure are eliminated, preventing many of the most common exploits and hacks on users' funds.
In deploying dMPC and employing threshold signatures, Qredo offers the crypto world a secure and efficient solution for crypto portfolio management and crypto custody. We're shaping the future of digital assets with the kind of robust solutions that we want to see and support elsewhere in the wider ecosystem.
Come join us. There's no time like the present to secure your digital future.