The concept of cold wallets or air-gapped key storage and usage has existed since well before the introduction of Bitcoin. Air-gapped storage has been used for critical data applications such as storing private keys for decades.
Unfortunately, cold wallet innovation has lagged behind the broader blockchain and digital asset industry. Recently, Blockdaemon has introduced groundbreaking cold storage solutions and advances, furthering institutional digital asset management.
Cold wallet limitations are well documented, as highlighted in our recent blog. A few examples include cold signing ceremony inefficiencies, the lack of policy controls, the lack of auditability, and of course the extraordinary costs of creating and maintaining physically secured storage facilities with stringent access controls to store cold wallets. Blockdaemon Institutional Wallet now supports cold storage with a new, improved approach that eliminates or at least minimizes most of those issues.
Firstly, Institutional Wallet splits the concept of a cold wallet into two distinct parts. The system’s backend stores the private key on air-gapped servers. The wallet’s frontend operates online, using the same wallet infrastructure that supports the online wallet operations for hot and warm wallet services. The frontend and backend systems are cryptographically paired to ensure secure communication and authentication.
Dividing the wallet into two segments lets the cold wallet backend offer air-gapped key isolation, safeguarding against online threats and allowing for physical security. Meanwhile, the online wallet frontend introduces game-changing new capabilities like policy control, quorum approvals, audit logging, and reporting.
Executives no longer need to be with the cold wallet in person; they can now approve transactions from anywhere using mobile devices with biometric checks. Now, instead of signing on their own, all policy requirements must be satisfied before signing any transaction with the air-gapped key. Moreover, complete audit records track who initiates and approves each transaction.
The result is a dramatic gain in operational efficiency, enhanced security through uniform policy enforcement, and better transparency via audit logs and centralized reporting.
The same wallet platform supporting the cold wallet services can also support your online, hot, and warm wallet services for uniform policy enforcement, reporting, and audit logging (see recent blog). This removes the need for separate license agreements and vendor relationships, simplifying support, training, and asset tracking across wallets.
Combining better cold wallet operations with fewer vendors and products yields significant benefits in economics, operations, compliance, and asset liquidity.
For more information, please visit blockdaemon.com/wallet/cold-storage or contact us.