Securing Crypto Assets on the Blockchain

Securing Crypto Assets on the Blockchain

Andre Stoorvogel

Director of Product Marketing at Rambus Payments

Views 363

Securing Crypto Assets on the Blockchain

02.04.2019 07:30 am

The rapid expansion of the cryptocurrency ecosystem demonstrates the power of the blockchain to revolutionize financial services and beyond. Yet at the same time, the inherent volatility provides a cautionary tale.

With blockchain implementations gaining traction, it is clear that a new approach is required to enhance the security and usability of crypto and digital assets. But how can this be achieved?

A token gesture or real security?

Tokenization is a trusted, proven technology already used to secure billions of payments in-store and online.

The good news is that this process can be applied to crypto assets.

By replacing sensitive credentials - such as the private keys for blockchain and cryptocurrency - with a unique token that can restrict use to a particular device or channel, tokenization mitigates fraud risk and protects the underlying value of credentials.

This is because tokens cannot be used by a third party to conduct transactions if intercepted, adding a layer of frictionless security that complements the immutability of the blockchain.

Two signatures are better than one

Employing multiple signature is another way to enhance security, through the introduction of additional distributed keys for recovery and authentication.

In practice, this requires at least two signatures to confirm a transaction, increasing security and preventing fraud. It also allows consumers to safely recover their public or private key if it is lost.

Importantly, as this approach still relies on the use of original keys that are vulnerable to attack, multi-signature functionality is only truly effective when combined with tokenization technology to ensure vulnerable original keys are protected if attacked.

Hard to hack ≠ hard to access

Until recently, the storage of crypto assets fell into one of two categories – hot and cold wallets.

Hot wallets are online storage services provided by exchanges, for example. Cold wallets are offline storage options and can range from USB devices to pieces of paper.

Both options have their problems. Hot wallets are constantly connected to the internet, meaning the vulnerable private keys are susceptible to attack from hackers and fraudsters. Cold wallets, while secure from hackers, limit the usability of cryptocurrencies. What’s more, if it is misplaced, or the hard drive corrupted, access to an asset will be irrevocably lost.

Given these challenges, it is apparent that there is a need to combine the security benefits of offline cold wallets with the convenience of an online wallet.

Segregated wallets fulfil this need by enhancing cold wallets with an additional security layer. When a user wants to access their asset, they can do so via a two-factor authentication protocol, which instantly makes their cold wallet warm. And by securing the asset in a cold environment, it cannot be hacked.

Usability – it’s the way forward

The usability problem for cryptocurrencies goes beyond just storage. The process of buying and selling is needlessly complex for novices and experts alike. From a security perspective, unfamiliar platforms and websites are an easy target for fraudsters.

But with many consumers now using online and mobile banking, there is a huge opportunity to incorporate blockchain solutions into the everyday experience. This will enable consumers to simply and securely access, trade and own multiple cryptocurrencies within a familiar environment.

A secure, convenient future for blockchain implementations

For a technology to be truly transformative, a secure foundation of trust and transparency is needed. Solutions that enable the secure storage and transfer of crypto assets, while democratizing access and improving the user experience, have the potential to enable this powerful technology to reach its full potential.

Interested in learning more about securing crypto assets on the blockchain? Download the Rambus eBook series now.

 

Latest blogs

Reza Rahmani Fard FIME

Beyond PSD2: Being proactive in the age of open banking

Open banking isn’t just a European pursuit. For those under PSD2 - the European regulation mandating banks to open-up their back-end to third-parties – the urgency to deliver these services is clear. But players further afield shouldn’t avoid Read more »

Asavin Wattanajantra Sage

AI & Automation: benefits for business & industry

Are you worried that robots will take over the world? You’re not alone. A world where robots are self-aware and can think for themselves is a favorite theme of filmmakers, writers and sci-fi fans. Characters like See-Threepio from Star Wars, Optimus Read more »

Isaac Palmer Flashpoint

ATM Shimmers Supplanting Skimmers

Automated tellers—literal money machines—cannot help but be a target for crime. Most are filled with money and run on software that contains exploitable security vulnerabilities or hardware that can be tampered with by hackers. Or bad guys can try Read more »

Patrick Bermingham Adflex

APMs for B2B payments – buzzword or next big thing?

To understand why APMs are become increasingly important in B2B payments, let’s first clear up some confusion: What are APMs? APM is a catch-all term to describe any payment method that does not require the use of a credit or debit card. There are Read more »

Thomas Pintelon Capilever

How liquid asset based lending brings benefits to both banks and their customers

Imagine you have a short-term cash need [university fees for your kids] but you do have some long-term bonds in your investments portfolio. Wouldn’t it be great if your bank allows you to temporarily block these assets and get a short term loan Read more »

Magazine
ALL
Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel