Blockdaemon Blog

Blockdaemon's Simplified Cold Wallet Signing Ceremonies

Wallet
Mar 8, 2024
By:
Frank
Wiener
&
Blockdaemon's simplified signing ceremonies not only streamline the transaction process but also bring about a paradigm shift in how digital assets are managed securely and efficiently. Learn why.

Traditionally, institutions have relied on off-the-shelf hardware wallets, Hardware Security Modules (HSMs), and in-person signing ceremonies to manage cold storage digital asset transactions. These methods, while secure, present several challenges. 

Blockdaemon’s Institutional Wallet has greatly simplified cold wallet signing ceremonies, and overall wallet operations. Our approach leverages cutting-edge MPC technology to secure transactions. 

With Blockdaemon, approvals and signings transform into a swift, mobile-enabled process. This allows for secure, efficient transaction approvals from anywhere, greatly simplifying how institutions handle digital assets. Through our solution, we ensure that managing digital assets is no longer a cumbersome process but a streamlined, secure, and efficient operation.

The Challenge with Traditional Cold Wallets

Custodians and institutions holding vast sums in digital assets need more than basic cold wallets. They require advanced solutions. These solutions must ensure top-tier security through multiparty control over transactions. Yet traditional cold wallet systems come with significant hurdles.

First, these systems demand the physical presence of multiple senior managers for transaction approvals. Coordinating such meetings can be challenging. It's not just about gathering busy individuals in one place. It also involves securing a location that meets stringent security standards.

Then, there's the pace of the process. Traditional methods are slow. In a fast-moving digital economy, delays in transferring assets can mean missed opportunities. Every minute counts, and the traditional way simply cannot keep up.

Moreover, the costs involved are substantial. The need for specialized security measures, along with the manpower to manage these ceremonies, adds up. Institutions find themselves facing not just financial strain but also operational inefficiencies.

Traditional cold wallet systems pose a complex challenge. They are slow, cumbersome, and expensive. For institutions in the digital asset space, these are not just minor inconveniences. They are significant barriers to efficient and secure asset management.

Blockdaemon's Solution: Simplified Signing Ceremonies

Blockdaemon has redefined the signing process for digital asset transactions. We replace the outdated need for physical gatherings with a sleek, mobile-driven approach. This change marks a significant advance in efficiency and security. Here’s how the Blockdaemon cold wallet signing ceremonies work:

1. Transaction Creation with Mobile Authentication: The process begins when the originator creates a transaction using the highly secure online wallet system. They then confirm the transaction request using their mobile device to enter a PIN and complete biometric authentication. This step ensures the transaction is initiated by an authorized user.

2. Online Wallet System Policy Verification: After the transaction is initiated, the online wallet system steps in. Our wallet excels in integration with customers' internal systems through our API, while still providing the security features of a cold wallet. It compares the transaction details against cryptographically protected and verified policies. These policies, designed for cold wallet transfers, typically require approval from multiple authorized individuals. Our system's flexibility and ease of integration highlight our commitment to being an API and UI-first product, ensuring a seamless blend of security and convenience for our customers.

3. Mobile Approval by Authorized Individuals: Authorized approvers receive a prompt on their mobile device to review the transaction. They then enter their PIN and complete biometric authentication to approve the transaction. This step uses distributed MPC key shares to sign the transaction intent, providing cryptographic verification of approvals. Only after this verification is the intent exported for actual transaction signing. This process ensures a quicker, more secure method of obtaining consents from multiple individuals, backed by cryptographic proof of each approval. 

4. Final Signing with a Private Key: Once the transaction meets all policy requirements, including the quorum of required approvals, it moves to the final stage. The transaction intent is then signed using a private key. This private key is hosted on an air-gapped machine running the cold wallet environment. This cryptographic signature finalizes the transaction, making it ready for execution.

For a full overview of how the transaction process works, with Blockdaemon’s optional cold wallet, check out this video

Benefits of Blockdaemon's Approach

Blockdaemon's approach to cold wallet signing ceremonies brings several key benefits. It focuses on speed, efficiency, and security. 

1. Speed: Transactions move faster. The mobile-based approvals cut down the time from initiation to completion. This speed ensures that institutions can react quickly to market changes.

2. Efficiency: Blockdaemon's approach enhances efficiency not by reducing the total number of steps, but by minimizing the steps that require physical presence with the cold key. A key feature of our system is the ability to batch pre-approved transactions and sign them collectively, rather than individually. This significantly streamlines the transaction process, saving valuable time and resources for institutions.

3. Security: At the core of Blockdaemon’s security strategy lies the use of MPC technology, both for the online and air-gapped components of our system. This dual application of MPC ensures that every transaction is protected by the most advanced cryptographic methods available. For a deeper understanding of why this approach offers superior security over traditional methods, we invite you to read our article on "Why Threshold Signature Wallets Are Better Than Multisig Wallets - Top 5 Reasons."

4. Reduced Costs: Operational costs drop significantly. The need for physical security measures, dedicated spaces, and staff readiness decreases. This reduction in logistical needs translates into financial savings.

5. Lower Logistical Burden: Blockdaemon significantly reduces the logistical complexities associated with traditional cold wallet signing ceremonies. By utilizing MPC technology, the act of signing with the cold key becomes an administrative step, not an approval step. The air-gapped key is used solely to sign pre-approved transactions, allowing for a broader set of potential cold signers. This flexibility not only streamlines the process but also improves efficiency and cycle times, as authorized individuals can approve transactions from anywhere, at any time, reducing the operational burden on institutions.

Conclusion

Blockdaemon's simplified signing ceremonies not only streamline the transaction process but also bring about a paradigm shift in how digital assets are managed securely and efficiently. This approach directly addresses the challenges faced by institutions, offering a solution that is both innovative and practical.

We encourage institutions looking for secure, efficient digital asset management to consider Blockdaemon. Institutions also have the option to access our Builder Vault self-service sandbox by registering today, to test-drive our world-class threshold cryptography services. Discover how our solution can transform your digital asset operations by registering today, or contacting us today for your tailored evaluation. 

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