Use cases for Securosys’ HSMs in the blockchain and crypto economy

Mt. Gox, never again! Funds, Banks, Exchanges, Trading Platforms, and Wallet Providers

The first extremely prominent and probably still most largescale “hack” of a crypto exchange was the “Mt. Gox hack”. A total of 850,000 Bitcoin were stolen, of which 750,000 were taken from exchange users and about 100,000 from the exchange itself.

That accumulated to around 7% of the total Bitcoin in circulation back then, which would be worth approximately $5.5bn today. No user or exchange wants to experience a debacle like that ever again.

When you sign up to a stockbroker platform or your bank’s stock trading platform and buy Amazon shares to invest your savings, you would never even think that there might be a risk that someone could steal your shares and disappear for good. The same level of security and the same feeling of secure platforms is what is lacking on any cryptocurrency and crypto assets exchange today. However, that is ultimately the level of protection that customers demand from the services they use. This makes the mass adoption of these high standards a necessity for the blockchain economy.

Securosys HSMs can secure any keys used by an exchange, fund, bank exchange, or any other kind of financial intermediary, so that a hack like the notorious Mt. Gox scandal could not happen again.

The same is true for “centralized” wallets. For the everyday user, it is not necessarily user-friendly and practicable to keep their private keys in a safe place. Most of the well-known fiat gateways (platforms that offer to sell you Bitcoin and other cryptocurrencies for USD, EUR or CHF) offer wallets where the users can keep their cryptocurrencies. This setup is convenient, yet poses a significant risk at the same time. The centralized service saves the addresses of private keys where the users’ cryptocurrencies are held. The trade-off is always control and security versus convenience and usability. These centralized services have to avoid security breaches at all costs, as shown by the example above. Take Joe, an average user who wants to buy and hold, or maybe even use cryptocurrency. What he doesn’t want to care about is safe key-keeping, and he definitely doesn’t want to be worried by the horrible breaches he read about in the news.

Some might believe that this is only possible with a significant amount of trust. That is true. However, we firmly believe that trust can be established if the equipment used for security is trustworthy: “Secure your communications — Trust your equipment!“

Safe ICOs

The popularity of initial coin and token offerings as a crowdfunding, seed funding and public funding option has grown massively. In any case, it is paramount to protect the investors’ and the company’s assets in the best way possible. The theft of the ICO proceeds would be a catastrophic event for both the investors and the funding-stage companies, as they’d be at risk to a total loss in that case.

Aside from security, stability and reliability are crucial as well. Bottlenecks in funding rounds are to be avoided at all costs. A participant lost is money lost. Even worse are crashes of ICO platforms due to high demand or malicious attacks. For all these cases, Securosys HSMs can provide the necessary technical platform to guarantee smooth procedures, automation, and compliant operations while also keeping everything exceptionally secure.

There is a great probability that initial token offerings will evolve to the “IPO 2.0” (article by our advisor Michael Guzik). In that case, the compliance and security demands will rise to a level heretofore unseen in the blockchain economy. Securosys lives up to this high standard by preparing and manufacturing its products accordingly.

Securosys is involved with several parties that are developing such ICO platforms at the moment. They are trusted and highly experienced players in both the IT and the blockchain economy.

Blockchain platforms and systems

The actual blockchains also need secure key handling to guarantee the safety of their users’ assets. In Bitcoin, for example, off-chain signing systems like Lightning Network need protection. Proof of stake protocols require the validating parties to keep a large amount of their assets in their wallets. Keeping these funds or assets in a “hot wallet”, which is connected to the network and easily accessible, makes them vulnerable to attacks and theft attempts. The Securosys trusted execution platform (TEP) HSM creates a safe environment to run these PoS operations.

Miners, particularly large-scale mining operations, accumulate large amounts of funds that they don’t necessarily move or sell for extended periods of time. They too might want to secure their mining proceeds with top-notch secure solutions, which can easily be done by using Securosys HSMs to store their keys.