From Single Key to Sophisticated Computation: The Evolution of Crypto Exchange Custody
- January 20, 2018
- Posted by: attia12345
- Category: ICO, Media
When Mark Karpeles sent 442,000 BTC between Mt. Gox wallets in 2011, purely to show that he could, it demonstrated the dangers of single key custody. Having one individual in charge of thousands of customers’ assets was a recipe for disaster. On that occasion, the transaction passed off without a hitch, but four months later the Gox boss was to lose 2,609 BTC due to a scripting error. The dangers of relying on one man were further reinforced in 2018 when Quadriga CEO Gerald Cotten died, taking his private keys with him, and leaving 115,000 customers out of pocket.
Crypto exchange custody has come a long way since the days of Mt. Gox, but as the fate of Quadriga, Mt. Gox and their ilk shows, there’s still room for improvement. Hot and cold wallet management remains a delicate balancing act for exchanges, which require the liquidity to expeditiously process customer withdrawals, while minimizing risk in the event of the hot wallet being hacked.