Custody at Conio — part 1. This is the 1st out of 3 articles…
By: Vincenzo Di Nicola
Tags: Wallet, Custody, Bitcoin, Blockchain, Cryptocurrency

This is the 1st out of 3 articles describing the cryptocurrency custody solutions developed at Conio

Real life challenges in a seemingly virtual world

«Not your keys, not your Bitcoin». This is a famous sentence in the Bitcoin community and made it famous by Andreas Antonopoulos, which highlights quite a truth regarding cryptocurrencies. That is, whoever has access to the private keys, de facto controls the funds associated to them. Without the private keys, no external entity (e.g., a bank, State, tax authority) can ever take your cryptocurrency, and you can enjoy the thought that funds are forever yours (future quantum computing breakthroughs aside).

However, as always when human nature is involved, things are in reality more complex. And in order for cryptocurrencies to become mainstream, these human-related challenges must be considered. It’s not a surprise that a Goldman Sachs spokesperson declared last year: «We believe that a custody offering is a logical precursor to digital asset market making»

At Conio we also believe that custody solutions are paramount to the overall cryptocurrencies success. And there are a number of unfortunate situations that may occur and must be taken into account. Below are a few:

Theft

Your funds may be cryptographically secure. However, as this xkcd figure illustrates, in real life a thief can take control of a victim’s cryptocurrencies funds by threatening his/her life and thus having the private keys revealed. Gory thought you might say, but unfortunately not all human beings despise violence.

Forgetfulness

People forget. Stop. It can be due to one’s own nature, or simply getting older. I myself am very messy, and this is actually the main reason that led me to study databases: quite a philosophical comfort in knowing how to find things easily.

Everyone forgets something at a certain point. “Where did I leave the house keys?” “Where did I park the car?”.

Even the ACINQ team (BTW, kudos to their work on Lightning Network) ended up forgetting the keys to publish the Eclair Android app on the Google Play Store.

So far we have been talking about somehow-fixable situations. Things are considerably more dire in the cryptocurrency world.

There are a number of (in)famous cases where the owners of massive amount of Bitcoins have lost their funds by accidentally formatting their drive or even throwing it into a dump.

2 years ago at the Web Summit in Lisbon I met a person who lost the private keys associated to the-then equivalent of € 30 Million. It’s true: “Not your keys, not your Bitcoin”. Though, it becomes hard for a person in that situation to agree with the statement.

Death

Image from https://bitcoinist.com/bitcoin-is-dead/

No one likes to think about his/her own mortality, but that’s part of our existence. What happens then to your cryptocurrencies? There are two philosophical points of views on this:

“After I die, I wouldn’t care less about my wealth. Let my riches die with me” “After I die, I wish my children, wife/husband, or my dears have access to my wealth. Let them enjoy it”

The latter case regards inheritance. However, how can a person provides for the heirs, without having first shared his/her private keys? And if s/he does share them, it would mean that others have access to the funds while the real owner is still alive.

If s/he does not share them, they simply go to the grave. Quite an infamous example is the QuadrigaCX exchange, where the founder — and apparently only private key owner of the deposit wallet — allegedly died in India last February.