In just over ten years the original white paper concept of a peer-to-peer electronic cash system has become a crypto economy that is evolving at lightning speed. We have progressed from a single decentralized virtual currency in 2009, to smart contract-based blockchains supporting thousands of different crypto assets today. Ethereum emerged in 2013 with a promising range of possible decentralized applications or dApps and Ethereum Classic has continued to flourish as a compatible sibling platform.

The Ethereum Classic community is growing along with the enhanced technical development and utilization of ETC. The key ETC components of a fixed monetary policy, retaining Proof of Work as the consensus system, and increasing collaboration around the Ethereum Stack all contribute to keeping Ethereum Classic in the top 5–10 most traded crypto-assets. ETC consistently sees more daily transactions than Litecoin, Dash, Doge, Monero, and other top cryptocurrencies.

The same short period has also seen headline-grabbing stories about electronic thieves hacking and phishing crypto wallets, and cybercriminals targeting cryptocurrency exchanges and causing millions of bitcoin and other altcoins to suddenly ‘vanish’ and accounts being completely lost. The industry is rapidly working on ownership safeguards and custody solutions and has come a long way in developing high level and reliable security and custody options.

From self-custody using both hot and cold hardware and software wallets, to regulated and unregulated exchanges, there are many ways to store crypto-assets, but most come with risks and vulnerabilities.

In May 2019 the hacking of Binance hot wallets resulting in 7000 bitcoins–the equivalent of $40 million in fiat currency–lost without a trace. The hackers employed multiple techniques including computer viruses and phishing attacks to infiltrate the Binance’s hot wallets, which held the majority of its funds.

Cold storage also poses risks to crypto-asset holders. In the case of QuadrigaCX, founder and chief operator Gerald Cotten passed away suddenly while on holiday in India. The private key password to an otherwise inaccessible encrypted offline repository, where the firm had kept the cryptocurrency deposits of 115,000 customers, died with him.

Self-custody presents risks as well. Writing passwords on paper may keep them safe from online hackers, but paper records can still be copied, stolen, burned, lost, or damaged.

Digital storage devices like a USB stick or external hard drive can fail and computers and hardware peripherals can crash; and data recovery can be expensive. What’s more, a data recovery process can recover secret passwords from old hardware, even after physical destruction.

According to a recent report by CipherTrace, a cryptocurrency intelligence firm based in Silicon Valley, cryptocurrency thefts reached $1.7 billion for 2018, and nearly tripled to top $4.26 billion in just the first 3 quarters of 2019.

Securing and managing crypto funds is one of the most important challenges for both institutions and investors today. To reduce the risks of private keys and wallet access being lost or hacked, some investors are looking for the assurance of security that is similar to the regulated security of the financial industry. A Crypto Custody solution is in high demand.

What is financial custody?

A financial custodian is a third party institution that holds customer securities in a manner that removes the risk of theft or loss of funds. Custodians may hold securities and other assets in electronic or physical form. Because custody is a regulatory requirement for traditional currency and securities, custodial service is often tailored to the needs of institutional investors and high net worth individuals.

A crypto custodian also eliminates the need for an investor to have technical knowledge. The custodian takes responsibility for developing and maintaining the technical elements of the service. Institutions that do not have the infrastructure to secure crypto assets can partner with a specialized custodian to serve their customers who have crypto holdings. High value creates high stakes and in the rapidly growing and evolving crypto sector, investors want assured security. Outsourcing crypto-asset custody to an insured 3rd party that maintains control of, but not “ownership” of, the keys can give assurance that their assets are secure.

As institutions enter the crypto space or start scaling into crypto, it’s reasonable to demand a custody service role in institutional business practices that will support the new crypto market.

Institutional investors are required to conform to regulatory standards and registration in traditional currency and security trading, requiring regular audits by independent parties. The custody solutions they choose must, therefore, have capabilities in place for meeting those requirements in the crypto asset realm.

An increasing number of competing custodial models is available to institutional fund managers and investors alike, but securing digital assets is challenging and complex. Convenience and security can be inversely proportional. Fast, flexible, and easy transaction capability can compromise security and add exposure to security sinkholes. Secure solutions are often slower, more rigid in their protocols, and more complex to use safely. Solutions that offer both easy transactions and security are rare, and generally expensive to implement making frequent transactions costly.

Trustology has crafted an insured custodial wallet solution that addresses both investor demand for security of the highest order, and ease of use. It also responds to regulated institutional needs for account segregation, advanced access, and authorization controls, and adds scalability that supports arbitrage plays, high-frequency trading, and hedging/speculating with leverage. It also enables fast response times, high security, and access flexibility.

Trustology’s solution also allows for easy coordination with developer APIs to provide convenience and flexibility while enabling access to new tools delivered by decentralised finance (DeFi) technology — DeFi tools that are providing new solutions for borrowing, lending, and stabilizing of capital through smart contracts. For example,Trustology’s recent integration with the Ethereum web-browser plugin MetaMask, enables users to run decentralised applications through a browser without having to run a full Ethereum node.

The merging of these two innovations will provide customers with a more secure wallet

alternative for assets, financial products or applications. DApp users who sync the TrustVault custodial wallet with MetaMask now have the option of using TrustVault wallet private keys in lieu of MetaMask’s local key store. The update will support signing and verifying of any Ethereum decentralised finance transaction across different websites without compromising security or access.

In collaboration with Trustology, ETC Labs is seeking ETC community insights on storage and usage to help better understand what custody services and features to provide to our community.

To contribute please take this survey.

About ETC Labs:

Contact us: info@etclabs.org

ETC Labs is focused on the advancement, development, utilization, and adoption of the Ethereum Classic community, core technology, and ecosystem through ETC Core and the ETC Labs Accelerate incubator program.

About Trustology:

Contact us: info@trustology.io

Visit: www.trustology.io

Trustology’s vision is to create the most compelling crypto-assets company of the 21st century. Our first focus has been securing and managing crypto-assets with our TrustVault platform technology.