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Fireblocks Testing Off-Chain Custody Solution to Prevent the Next FTX From Happening

by BlockNews Team
February 21, 2023
in BUSINESS, CRYPTO, FINANCE, MEDIA
Reading Time: 3 mins read
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  • Fireblocks has announced a new technology that allows institutions to custody digital assets off-chain, making it easier and more efficient to manage large amounts of cryptocurrency.
  • This off-chain custody solution is designed to address the growing demand from institutions for more flexible and efficient ways to manage digital assets, while still ensuring security and compliance.

As cryptocurrencies continue to gain mainstream adoption, their security and storage have become increasingly important. Fireblocks, a digital asset custody and settlement platform, has recently launched a new technology for off-chain custody that aims to enhance the security of cryptocurrency storage and transactions.

Traditional cryptocurrency custody solutions involve the storage of private keys on a blockchain, which can be vulnerable to attacks by hackers. Fireblocks’ off-chain custody solution addresses these security concerns by storing private keys in a secure enclave not connected to the internet.

This off-chain custody solution is designed to enhance the security of digital assets while also improving transaction speed and scalability. By keeping private keys in a secure enclave, Fireblocks can significantly reduce the risk of loss or theft of digital assets.

Fireblocks’ Off-Chain Custody Technology

The secure enclave is a hardware-based solution that stores private keys offline. Fireblocks’ off-chain custody solution uses multi-party computation (MPC) technology, which allows for the sharing of secret keys among multiple parties while ensuring the security and confidentiality of the information.

Fireblocks’ off-chain custody solution can also enhance transaction speed and scalability. By keeping private keys offline, the time required to sign a transaction can be reduced significantly, leading to faster transaction times. In addition, the MPC technology used by Fireblocks enables multiple transactions to be signed simultaneously, improving the platform’s overall scalability.

Regulatory Pressure Surrounding Custody of Funds

Fireblocks’ off-chain custody solution is particularly relevant in the increasing regulatory scrutiny of cryptocurrency transactions and exchange custody. The platform’s secure enclave technology ensures that private keys are kept offline, and transactions only occur upon settlement.

This development is of particular significance given the recent collapse of the cryptocurrency exchange FTX. One of the critical factors in the downfall was the transfer and misuse of customer funds for other means. Fireblocks’ off-chain custody solution is meant to prevent another FTX-like meltdown from happening again.

Fireblocks has already gained significant traction in digital asset custody and settlement, with over 500 customers worldwide, including some of the world’s largest banks and cryptocurrency exchanges. It is expected to become the de facto solution across all the largest centralized exchanges in the future.

Fireblocks’ off-chain custody solution is a promising digital asset custody and settlement development. By using a secure enclave to store private keys offline, the platform can significantly enhance the security of digital assets while also improving transaction speed and scalability. As the cryptocurrency industry continues to evolve, innovative solutions like Fireblocks’ off-chain custody technology will play an increasingly important role in securing the future of digital assets.

Tags: BusinesscryptoCrypto SecurityFireblocksOff-Chain Custody
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