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Sheel |
February 12, 2024

When investing in cryptocurrencies, ensuring the protection of your digital assets is of paramount importance. Within this ecosystem, crypto custodians play a pivotal role by offering secure storage and overseeing the management of digital assets.

Opting for self-crypto custody service provides you with control. Still, it comes with substantial risks, including the potential loss of private keys and passwords or the need to handle security breaches independently. Additionally, it acts as a single point of failure; it fails to comply with the latest compliances and fails to identify risks and behavioural anomalies in transactions.

The selection of the right digital asset custodian is crucial in safeguarding your digital holdings. For cryptocurrencies to achieve broader acceptance, robust crypto custody solutions become indispensable for both individual and institutional investors alike.

Key takeaways:

  • Digital asset custodians play a pivotal role in the blockchain ecosystem by providing crypto custody services for digital assets, ensuring the safeguarding of investors’ digital holdings.
  • Crypto custodians ensure secure storage and facilitate digital transactions through advanced cryptography and hardware security measures.

Explanation of Digital Asset Custody

Digital asset custody is a broad term that includes various methods of storing and protecting digital assets on behalf of their owners. Digital asset custody is in many ways similar to the custody of traditional financial assets; crypto custody providers take responsibility for securely storing investors’ assets and typically also offer other services, including the ability to buy and sell them.

However, there are also important differences. Notably, the nature of digital assets means that secure custody is even more critical than for traditional financial assets. Digital assets such as cryptocurrencies are created and transferred between owners using cryptography and a decentralized network called a blockchain. 

Owners acquire digital assets in transactions recorded on the blockchain, and those transactions are typically the only documentation of the assets’ existence. The owners are issued cryptographic keys that prove their ownership of the assets, to be used when transferring them between owners or using them to buy things. So, technically, custodians don’t store the assets themselves; they store the owners’ cryptographic keys. Those keys must be protected to ensure the owner’s assets are safe. If they are lost or stolen, the assets may be unrecoverable.

Comprehensive Overview of Various Digital Asset Types

Digital assets encompass diverse categories distinguished by their characteristics and functionalities within the digital landscape. The principal classifications include:

  • Cryptocurrencies: Represented by digital currencies like Bitcoin and Ethereum, cryptocurrencies operate on decentralized blockchain networks. They serve purposes such as transactions and investments, and act as a store of value.
  • Utility Tokens: Tokens designed to access specific applications, platforms, or services, providing users with special privileges or discounts within the associated ecosystem.
  • Security Tokens: Digital representations of ownership in real-world assets like equities, debt, real estate, or investment funds. Security tokens adhere to securities regulations and often yield dividends or revenue shares.
  • Non-Fungible Tokens (NFTs): Unique digital assets verifying ownership or authenticity of specific items, including digital art, collectables, or in-game assets. Each NFT is distinctive and cannot be exchanged on a one-to-one basis.
  • Stablecoins: Cryptocurrencies’ pegged to stable assets, such as fiat currencies (e.g., USD), to mitigate volatility. Stablecoins offer stability and are commonly utilized for transactions and as a store of value in the crypto space.
  • Tokenized Real Assets: Digital representations of tangible assets like real estate, art, or intellectual property. Tokenization simplifies the division, transfer, and ownership of traditionally illiquid assets.
  • Governance Tokens: Tokens grant holders the ability to participate in decision-making processes within a blockchain network or platform, empowering them to propose and vote on changes.
  • E-Money Tokens: Digital representations of fiat currency issued by financial institutions or governments. Safely stored and transacted electronically, these tokens bridge the gap between traditional finance and the digital realm, facilitating seamless online transactions and payments.

 

Deep dive into digital crypto asset custody:

The digital asset market is still in its early stages, particularly compared to traditional financial markets. While the custody business model exists in both realms, the definition of “custody” in the digital asset space has not yet been solidified. In the digital asset landscape, the concept of custody is more flexible and represents a broad term that revolves around safeguarding assets on behalf of their owners.

Many purported ‘custody’ providers in the digital asset sphere need to genuinely offer custody. Instead, they provide hot wallets to store customers’ private keys without holding the assets’ custody. When users deposit funds into centralized exchanges, borrowing/lending platforms, or yield-generating solutions, these funds are considered ‘custodied’ on the customer’s behalf through a hot wallet provided by the platform. However, these digital asset custodian wallets do not guarantee asset segregation or ensure protection against theft, loss, or misuse. Essentially, these ‘custody’ providers offer tools for customers to hold their funds themselves but do not actually hold the assets on their behalf.

While such solutions enhance liquidity, they come with risks. Because they offer only hot wallets connected to the internet, they create more opportunities for hackers to exploit vulnerabilities. Additionally, as the crypto custody service provider operates these wallets, there is no assurance that a customer’s funds are immune to the provider’s activities unrelated to the customer’s decisions.

For robust digital asset custody, various options will be available. Opting for a solution that mirrors traditional finance practices is the key to ensuring complete protection of your digital assets. Before selecting a digital crypto asset custody provider, it is crucial to ask the right questions. Are they regulated? Do they have standard security measures and certifications? Do they follow key compliance checks? How do they protect private keys? How fast do they process transactions?

How does digital asset custody operate?

Crypto custody involves securing the private key that serves as proof of ownership for the funds stored within your cryptocurrency wallet. In traditional banking, custodians are typically financial institutions, as mandated by regulations. In the realm of cryptocurrencies, however, holders have the option to act as their own crypto custodians. To draw a parallel, envision the choice of either personally safeguarding gold bars under your bed or entrusting a third-party custodian to secure them within a vault protected by security measures.

Within the sphere of crypto custody, there are two primary types to be aware of:

Self-Custody

As previously discussed, self-custody entails personally holding the private key for your wallet. This arrangement grants you exclusive proof of ownership and access to your holdings. While it affords significant control, self-custody also entails substantial responsibility. Acting as your own digital asset custodian means you bear the full spectrum of risks. If you lose access to your physical device (e.g., a cold wallet) or forget the private key, the likelihood is that your cryptocurrency will be irretrievably lost.

Managed Custody 

Third-party custodians offer managed custody alternatives for individuals and institutions who prefer not to shoulder the responsibility of managing their cryptocurrency accounts or find the technical aspects daunting. These custodians are registered, regulated financial institutions holding either state-level or national licenses to operate as custodians. 

Functioning similarly to a traditional checking account with a bank, third-party crypto custody solutions securely manage clients’ private keys and ensure their funds are kept in segregated accounts, in either hot or cold wallets based on their requirements and are protected by a layer of security protocols with 24/7 SOC monitoring.

Engaging with a third-party digital asset custodian involves undergoing know-your-customer (KYC) and anti-money laundering (AML) checks, integrating with Travel Rule compliance checks and following the latest mandates issued by financial bodies to comply within their operating jurisdictions. These compliance check-ups ensure the transactions’ legitimacy and prevent involvement in illicit activities.

There are three distinct categories of third-party crypto custodians based on the nature of the financial institutions:

  • Exchanges: Centralized cryptocurrency exchanges typically handle the custody of their customers’ assets. Some exchanges outsource their security requirements to external custodial service providers. It is important to note that when utilizing a centralized exchange, users do not possess the private keys to their exchange wallet, exposing them to potential losses in the event of a hack or the exchange’s insolvency.
  • Institutional custodian: Institutional digital asset custodians act just like traditional systems, providing bank-grade custody solutions to institutions that are seeking to safeguard their entire treasury. These institutional custodians’ support are regulated, insured, qualified to operate in licensed jurisdictions, and possess all the pre-requisites to provide fully managed custody of digital assets, promising their clients with utmost security, transparent segregation of assets, and highgest standard of key management and wallet management standards.
  • Custodial Banks: Since July 2020, every custodial bank in the U.S. has been authorized to provide crypto custody services following the Office of the Comptroller of the Currency (OCC) clearance. This regulatory development has paved the way for major custodial banks such as BNY Mellon, Citibank, and Fidelity to enter the crypto custody market.

Regulatory Compliance and Security Standards for Crypto Custodians

A reputable crypto custodian safeguards assets and adheres to applicable laws, regulations, and industry best practices. These standards are established by entities such as the U.S. Securities and Exchange Commission (SEC) and the U.S. The Commodity Futures Trading Commission (CFTC), including regulatory bodies in Abu Dhabi, Hong Kong, Europe and Singapore, are designed to ensure custodians implement robust security protocols to protect digital assets.

Selecting a custodian necessitates verifying compliance with regulatory requirements and confirming the adoption of contemporary security measures, including encryption and multifactor authentication, to restrict unauthorized access and mitigate cybersecurity threats. Here are key indicators that a digital asset custodian is a suitable choice for your business:

  1. Regulatory Compliance: Digital asset custodians must adhere to relevant laws and regulations, encompassing Know Your Customer (KYC) and anti-money laundering (AML) rules. Possession of proper licensing and oversight provides assurance that the crypto custodian meets reporting, auditing, and fraud detection standards, offering accountability and recourse in case of issues.
  2. Security Standards: A qualified digital asset custodian should employ state-of-the-art cybersecurity measures, such as cold (offline) storage, multi-signature wallets, multiparty computation, biometrics, and hardware security modules. Rigorous protocols, like proof of reserves, should undergo regular audits. Additional protection layers can be provided through insurance coverage. Security certifications like ISO, SOC and CCSS also are crucial to pose. Advanced cybersecurity measures include penetration testing, data encryption, defence against distributed denial of service (DDoS) attacks, and continuous 24/7 monitoring to prevent breaches and data loss.
  3. Asset Segregation: Custodians should implement protocols to segregate client assets from their own holdings, preventing the commingling of funds. This ensures protection for your assets, especially in scenarios like bankruptcy.
  4. Transparency: Digital asset custodians must maintain full transparency regarding how holdings are secured and managed. This involves frequent auditing and reporting. Real-time access to account overviews and transaction tracking should be provided, allowing clients visibility into their holdings. Legitimate and expert custodians uphold transparency without ambiguity.

What’s ahead for digital asset custodians?

Cryptocurrencies have maintained their presence for over a decade, demonstrating resilience in the face of regulatory uncertainties that characterized much of their existence.

As regulatory scrutiny intensifies and mainstream institutional interest grows, investments in cryptocurrencies are poised to gain popularity. The widespread adoption of these assets among institutional and retail investors will drive the inclusion of crypto custody services. This strategic move aims to retain customers and increase the share of wallets in an evolving financial landscape. Nevertheless, ensuring regulatory alignment for crypto assets poses inherent risks similar to traditional assets. Concerns such as the potential for large-scale fraud or the loss of private keys could undermine the credibility of cryptocurrencies as a reliable alternative asset class.

Custodian banks should exercise caution and address these challenges proactively when introducing crypto custody solutions. We assert that crypto custody represents a significant and timely business opportunity for banks. To capitalize on this opportunity, a comprehensive understanding of the requisite technologies for scalable crypto custody services, the associated security considerations, and organization-specific nuances is imperative. Taking confident and decisive actions is key, as banks must position themselves strategically to stay ahead in this rapidly evolving landscape.

Within the world of cryptocurrency and blockchain technology, security stands as a top priority. Private keys, serving as the gateway to digital assets, are widely regarded as highly sensitive information. The adoption of sharding private keys has emerged as a prevalent practice, aiming to provide security and mitigate the risks linked to a single point of failure.

Definition of Key Sharding 

Key sharding, also known as Shamir’s Secret Sharing, is a method in which a private crypto key is divided into distinct pieces or shards. Each shard alone is ineffective unless enough shards are combined to reconstruct the original key. For instance, if there are 5 shards and only 3 are required for access, the holders of those 3 shards can collaborate to gain access. This process is deeply rooted in cryptographic principles, fostering more decentralized risk in the emerging economy. Secret sharing of this kind finds application in scenarios like custody-free clearing houses or recovery mechanisms where no single entity possesses the complete key.

To gain access to the crypto assets linked to a private key share, a designated number of shares must be collectively utilizing a specified algorithm or protocol. This approach has emerged as a notable technique in the crypto custody sector, offering substantial benefits in terms of data storage, performance optimization, and security enhancement. 

The adoption of key sharding by the blockchain community was inspired by the concept of database sharding. Multi-party computation (MPC) leverages key sharding to deliver top-tier security to institutional clients, mandating the validation of a transaction for signing with M out of N (e.g., 3 out of 5 key shares). 

Importance of Asset Protection

Crypto investors holding digital assets in their crypto wallet often opt for a level of asset protection in order to mitigate third-party risk.  However, the safeguard offered by these advantages is not absolute. In cases where a cryptocurrency owner is involved in litigation or bankruptcy, a court may compel the disclosure of all assets, including any cryptocurrency holdings.

The importance of asset protection solutions remains significant in the crypto-industry. As interest in this asset class grows, individuals with substantial cryptocurrency holdings should ensure the protection of their wealth. Similar to traditional financial assets like cash, bonds, or publicly traded securities, cryptocurrencies can benefit from protection measures such as asset protection entities.

Overview of Key Sharding as a Security Measure

The sharding process involves the fragmentation of a single private key into multiple pieces, commonly known as “shards.” Individually, each shard lacks the ability to access the corresponding wallet or digital assets. However, when these shards are combined, they can reconstruct the original private key. This methodology introduces an additional layer of security by dispersing control over the private key.

A primary challenge that has surfaced in this practice is security. Despite the isolation of each shard, exclusively handling its designated data, there exists a security apprehension related to shard corruption. This involves a scenario where one shard infiltrates another, leading to potential information or data loss.

Visualizing each shard as an independent blockchain network with authenticated users and data, there is a vulnerability to hacking or cyber attacks that could compromise a shard. In such a scenario, an attacker might manipulate the shard, introducing false transactions or malicious programs.

Concept of Sharding in Key Management

When it comes to securing the private keys controlling crypto assets, wallets with key sharding capabilities provide robust protection against potential security breaches for holders.

Instead of creating a master private key and storing it on a device susceptible to compromise, wallets distribute key shards among the devices of participating parties, such as you (the client), your solicitor, and Liminal.

Utilizing another secure computation protocol called zero-knowledge proof, which verifies information between parties without disclosing the information itself, a key shard can demonstrate its authority to co-sign a transaction.

As the transaction-executing key is a collectively generated value, a complete key never exists in a singular form or resides on any single device. This effectively makes key theft attacks impossible and safeguards against internal fraud and collusion, preventing any employee or group of employees from misusing the key.

How Key Sharding Differs from Traditional Key Management 

In their quest for a solution, innovative blockchain developers draw inspiration from contemporary database solutions. The practice of sharding, commonly employed in the database storage industry, involves dividing the database’s data body into interconnected layers or shards. This process has become an industry standard. This approach enhances access speed to stored information by facilitating a more direct route for queries, as opposed to traversing the entire database bit by bit.

Applying this concept to blockchain solutions, developers partition the public ledger into shards distributed across multiple nodes in the network as well as private keys. Individuals seeking access to a specific portion of the ledger can efficiently do so by navigating a selected path of nodes to locate the correct node with the relevant information.

For instance: In sharded blockchains, assembling and examining the entire ledger is made possible through key sharding or Shamir’s Secret Sharing. Key sharding involves distributing the blockchain data and the respective access keys for each dataset across the network’s nodes. When a user on one node aims to access all the data, they need to connect with other users on different nodes who have access to the remaining shards of data. In a sharded blockchain, only a few distinct keys, such as 3 or 4, are required for complete access, even in networks with thousands of keys.

Liminal’s institutional wallets, comprising both cold storage and hot wallet solutions, operate on multisig and multi-party computation technology. This ensures that complete access to the private key is never held by a single entity or individual. Key shares belonging to our clients are securely stored in air-gapped devices strategically distributed across various geographical regions.

Benefits of Key Sharding

Here are the major benefits of key sharding:

Distributed Trust

In the event of a breach or compromise of a shard, the attacker would only gain access to a portion of the data, thereby minimizing the impact on the overall system. This distributed approach adds an additional layer of protection against single points of failure and malicious attacks.

Enhanced Performance

Key sharding empowers the system to efficiently handle a substantial volume of transactions without compromising performance. Through the utilization of parallel processing and optimized resource management, key sharding ensures that the cryptocurrency network can scale effectively to meet the demands of a growing user base.

Increased Scalability

Key sharding facilitates horizontal scalability by incorporating additional shards to accommodate heightened transactional volume. This scalability feature allows the cryptocurrency network to expand and manage larger capacities without sacrificing performance or efficiency.

Fault Tolerance

Key sharding incorporates built-in fault tolerance capabilities. In the event of a shard or storage node becoming unavailable or experiencing a failure, the remaining shards can continue to operate, ensuring uninterrupted service. This fault-tolerant design enhances the overall resilience of the cryptocurrency network, thereby reducing the risk of data loss or service disruption.

Implementing Key Sharding

Create Dependencies:

To begin, import the required libraries and generate the encryption key. It’s essential to note that the encryption key should never be hardcoded and must be maintained with the utmost security.

Establish a Wallet and Derive Private Key:

Following that, establish an Ethereum wallet and derive a private key from it. This step can be adapted for any blockchain relying on private keys.

Encrypt the Private Key:

Utilize `libsodium-wrappers` to encrypt the private key using the provided encryption key. Ensure that the sodium library has been initialized.

Shard the Encrypted Private Key:

Proceed to shard the encrypted private key into multiple pieces. In the case of MPC wallets, three shards are created, but you have the flexibility to adjust this number as needed.

Implement Enhanced Security Measures:

For an additional layer of security, consider applying supplementary encryption layers to each shard. For instance, you may opt for different encryption algorithms or store shards in physically separate locations.

Conclusion

Here, we discussed the practice of sharding private keys to enhance security in blockchain and cryptocurrency applications. The process involves breaking a single private key into multiple shards and implementing additional encryption layers, thereby significantly reducing the associated risks of private key management.

However, it’s essential to recognize that with heightened security comes increased responsibility. Safeguarding your private key shards is paramount, as the loss of access to them could lead to the permanent forfeiture of digital assets. Always adhere to best practices and explore additional security measures to effectively protect your crypto assets.

Keep in mind that this guide serves as a foundational resource for sharding private keys. Feel free to modify and expand upon these concepts to tailor them to your specific security requirements.

 

FAQ

What is key sharding?

Key sharding encompasses the distribution of private keys and transaction data across numerous shards. Each shard is tasked with managing and processing a specific subset of the total data. The objective of key sharding is to enhance system efficiency by breaking down data into smaller, more manageable pieces, thereby distributing the computational workload. This approach ensures that no single entity retains absolute control over the complete key.

How does key sharding enhance security?

Key sharding strives to improve system efficiency by dividing the data into smaller, more manageable fragments. This approach distributes the computational workload, preventing any single entity from having absolute control over the entire key.

How are key shards distributed or managed?

The logical shards are dispersed among distinct database nodes known as physical shards. Each shard is capable of accommodating multiple logical shards. Nevertheless, the data collectively housed within all the shards represents a complete logical dataset. Database shards exemplify a shared-nothing architecture.

Can you provide an example of how key sharding works in practice?

After the column undergoes the hash function, hash values are produced according to the shard ID. Columns exhibiting comparable hash values are then stored within the same shard.

What happens if one of the key shards is lost or compromised?

If one of the keys is lost, you can use the remaining keys to unlock the wallet. For instance, if the device holding the keys is lost, stolen, or damaged. Losing a key signifies that the owner risks relinquishing control over their blockchain account, associated identity, and assets.

Is key sharding only applicable to encryption keys?

Yes, the concept of key sharding is applicable to encryption keys.

How does key sharding protect against insider threats?

Central to the management and security of crypto assets are private keys. A private key is a distinctive alphanumeric code that provides users with access to their digital assets. To bolster security further, a private key can be fragmented into multiple pieces, known as key shares or key shards.

Are there any drawbacks or challenges associated with sharding?

Although sharding decreases the workload on individual nodes, it introduces increased complexity to the database and its applications. The partitioning of the network with individual validators for nodes reintroduces the single-point-of-failure issue, diminishing decentralization.

Can key sharding be used in combination with other security measures?

Utilizing key sharding, multi-party computation (MPC) ensures top-tier security for institutional clients, necessitating the validation of a transaction for signing with M out of N (e.g., 3 out of 5) key shares. 

How scalable is key sharding for large-scale systems?

Sharding stands out as a highly practical approach for achieving scalability in a blockchain system, enabling parallel computation, storage, and processing. The system’s capacity and throughput may exhibit a linear relationship with the number of shards or participating nodes.

January 22, 2024

In the world of digital currency, prioritizing security is paramount due to its vulnerability to attacks. The current structure of the internet relies on numerous trust models and has, to a large extent, obscured privacy and security measures. As users of the internet, we often take our security for granted, assuming that someone else is managing it on our behalf. Consequently, when faced with the need to address security concerns ourselves, it can feel unfamiliar.

One might question the necessity for multiple steps in Bitcoin or Ethereum transactions, the emphasis on precautionary measures, and the significance of managing cryptographic keys. In the realm of Bitcoin and other cryptocurrencies, security is an individual responsibility, demanding a serious and proactive approach. It is essential to maintain a cryptocurrency security checklist and regularly assess security measures to close any potential vulnerabilities.

For many users, security considerations primarily center around the choice of crypto-wallets used for storing digital assets. Crypto wallets serve as significant targets for potential threats to funds, and any lapse in security can result in the loss of assets. When establishing a crypto-wallet, the choice typically lies between a single-signature wallet and a multi-signature wallet. Each implementation comes with its set of advantages and disadvantages, and the selection may depend on the specific requirements of different situations.

Definition of Wallets

A cryptocurrency wallet serves as an application designed to function as a digital counterpart to a physical wallet, where one typically stores cash and cards. In the context of cryptocurrency, this wallet holds the passkeys essential for signing your cryptocurrency transactions. It acts as an interface, facilitating access to your crypto assets.

These contemporary cryptocurrency wallets play a crucial role in making blockchain technology accessible to a broader audience. In the initial stages of cryptocurrency, the process of sending digital currency involved manually entering lengthy cryptographic keys. However, modern software has automated much of this process.

The genesis of cryptocurrency wallets traces back to Bitcoin’s developer, Satoshi Nakamoto, who created the first wallet. The second wallet belonged to Hal Finney, an individual who communicated with Nakamoto and is reported to have been the first to run the Bitcoin client software wallet. Nakamoto initiated the cryptocurrency movement by sending Finney 10 bitcoins as a test transaction. This marked the beginning of the widespread interest in cryptocurrencies.

Importance of Security in Cryptocurrency Transactions

In the event of a security flaw in centralized networks, attackers can gain access to a user’s account. However, the prospect of hacking into a decentralized crypto network is exceedingly challenging. This difficulty arises from the fact that attackers cannot steal a user’s cryptocurrency without obtaining access to their private key.

The primary reasons to ensure strong security of cryptocurrency are outlined below:

1. Balance Discrepancy:

Cryptocurrency networks consist of numerous nodes, each having a copy of the database. If an attacker manages to alter the balance on one node, it will differ from the balances stored on other nodes. This discrepancy creates an anomaly, resulting in the rejection of the compromised node’s displayed balance.

2. Signature Verification:

Every transaction in cryptocurrency requires valid signatures. Approval of a transaction by one node necessitates the presence of the signature for other nodes to validate it as legitimate. If a signature is absent, other nodes will reject the transaction.

3. Protection Against Double-Spend Attacks:

Cryptocurrency security safeguards against double-spend attacks, where compromising a node requires displaying a transaction history longer than that of all other nodes. This protection is reinforced by making such attacks financially prohibitive, with investments often surpassing potential returns.

How do Single Signature Wallets Work?

Single-signature wallets represent the most straightforward and widely utilized category of cryptocurrency wallets. In this context, “single signature” denotes a single private key linked to a user’s address, granting them absolute control over their funds. When initiating a transaction, the private key acts as both proof of ownership and authorisation to sign the transaction.

As the most basic form of cryptocurrency wallets, single-signature wallets are easily accessible to individual users with relatively modest volumes of digital assets for transactions. Their setup facilitates swift decision-making, remains uncomplicated, and offers an appealing ownership feature without reliance on external entities.

However, the vulnerability of single-signature wallets is notable due to their dependence on a lone private key, creating a singular point of failure. If the private key is compromised, the user’s wallet becomes susceptible to unauthorized access. Additionally, in the event of key loss or accidental deletion, all digital assets stored in a single-signature wallet may become permanently inaccessible.

What is a Multi-Signature (MultiSig) Wallet?

A multi-signature wallet, in the web3 ecosystem, necessitates multiple signatures—rather than just one—to execute each transaction. These signatures correspond to distinct cryptographic private keys, and a specified threshold of keys must sign a transaction to validate it.

The workflow of a multisig wallet remains consistent regardless of the number of signers. Any party involved in a multisig wallet can initiate a transaction signed with their private key. However, the transaction remains pending until other parties sign it.

Multisig wallets can adopt an N-of-N setup, where all signatories must validate a transaction. For instance, a 2-of-2 method requires both parties to validate a transaction for it to be considered valid.

Alternatively, an N-of-M setting demands a specific subset of signers to approve a transaction. Taking a 3-of-4 wallet as an example, three out of four signers must validate the transaction for it to be executed.

In either case, it’s crucial to distribute multisig private key access among distinct entities. A multisig setup where a single entity holds multiple private keys and stores them in a single location is essentially equivalent to a single-key wallet. The preferred approach is to grant access to entities in a manner that a single security breach does not result in the loss of two or more keys.

Many blockchains incorporate functionality that enables users to implement multi-signature wallets. Cryptocurrency exchanges and custodians also deploy multisig wallets, storing associated private keys in diverse locations to enhance the security of client assets.

Benefits of Single signature

User-Friendly – Access is easily obtained by setting up a single account (username and password), providing entry to multiple functionalities.

Efficiency – Only one signature is needed, saving time and offering convenience to users. This eliminates the necessity to create and remember multiple usernames and passwords.

Streamlined Access – Seamlessly transition from one service or functionality to another without the need for re-authentication.

Benefits of Multi-Signature

There are several notable advantages to employing a multi-sig wallet:

1. Increased Security:

Multi-sig wallets offer a heightened level of security compared to single-signature alternatives. Obtaining all the required keys for authorizing withdrawals from a multi-sig wallet is considerably more challenging for hackers. By reducing reliance on a single person, these wallets also mitigate the risk associated with depending on a single device. For instance, if the sole private key is on a malfunctioning device, access may be lost. However, with multi-sig keys distributed across several devices, the risk of losing a private key is generally minimized.

2. Escrow Transactions:

In traditional terms, escrow involves a legal arrangement where a third party holds funds until specific conditions are met. A 2-of-3 multi-sig wallet enables third-party involvement in escrow transactions between two parties (A and B). In this setup, the transaction includes a mutually-trusted third party (C) in case of disputes. If a dispute arises, only A or B can authorize the transaction, allowing C to make the final decision.

3. Two-Factor Authentication (2FA):

Multi-sig can serve as a form of two-factor authentication (2FA) since users can possess private keys on different devices. However, there are associated risks when using multi-sig technology as 2FA, as a device holding one private key can be lost, stolen, or damaged. For instance, in a 2-of-2 wallet signature scenario, losing a key on one device would render it impossible to recover funds.

Conclusions

Multi-signature (multi-sig) wallets and single signature wallets cater to businesses, organizations, and groups seeking shared access to on-chain digital assets.

While both wallet types have their respective advantages and disadvantages, in scenarios requiring shared control, multi-sig wallets generally offer superior benefits compared to single-sig wallets.

It’s worth noting that multisig wallets entail a slightly more complex initial implementation than single-sig wallets. However, this complexity is a one-time task, and the ongoing management of the wallet becomes more straightforward.

For businesses prioritizing easier implementation, multi-sig wallets could be a viable option.

This guide is intended to supplement your research and should not serve as the final decision-maker. It is always advisable to conduct thorough research independently before making any financial decisions.

 

FAQ

What is a single signature wallet?

Single-signature wallets feature a straightforward key management system, where a sole private key is responsible for executing transactions on the blockchain through signing. Complete control over the stored cryptocurrencies is granted to any entity with access to this single private key.

What is a multi-signature wallet?

A multi-signature wallet is a cryptocurrency wallet that mandates multiple signatures, rather than just one, for the execution of each transaction. Different cryptographic private keys are linked to these signatures, and a specified threshold of keys must participate in signing a transaction to validate it.

Why choose a single signature wallet?

Single-signature wallets are user-friendly and straightforward, making them a preferred option for individuals new to cryptocurrencies. Nevertheless, they come with certain security risks, as the loss or theft of a single private key can lead to the complete loss of all funds stored in the wallet.

Why choose a multi-signature wallet?

Multi-signature cryptocurrency wallets offer enhanced security for crypto assets, albeit with additional technical prerequisites for configuration. These wallets are specifically engineered to reduce the risk of digital asset theft, ensuring that access requires more than just a password or a single wallet key.

How does a single signature wallet work?

When you sign a transaction digitally, you are essentially affirming, “I am the rightful owner of the funds, possessing the key for their management, and I authorize this transaction.” Single signature, also referred to as “basic,” cryptocurrency wallets require just one signature to validate a transaction.

How does a multi-signature wallet work?

A multi-signature wallet in the world of cryptocurrencies demands the involvement of multiple signatures, rather than a singular one, for the execution of each transaction. These signatures correspond to distinct cryptographic private keys, and a predetermined threshold of keys must collectively sign a transaction to validate it.

Which is more secure, single signature or multi-signature wallets?

Multisig transactions offer heightened security compared to single-signature transactions. In a multisig transaction, a minimum of two signatures is necessary to authorize the transaction. This concept proves beneficial when ownership involves multiple parties, and the consensus of all parties is required to execute the transaction.

Are multi-signature wallets more complex to set up and use?

Setting up and using these cryptocurrency wallets demands a higher level of technical expertise compared to traditional crypto wallets, which only require a single signature. Despite the increased technical complexity, the enhanced security benefits make these additional requirements worthwhile, particularly for individuals with more intricate security needs.

Can a wallet be converted from single signature to multi-signature, or vice versa?

No, rather you can transfer funds from single signature to multi-signature wallet. To set up a multisig wallet the first step is to determine the number of signatures needed for transaction authorization. The second step is selecting the location for each wallet. The third step is establishing your wallet. Next step is safeguarding your recovery phrases. Finally, familiarize yourself with using the wallet.

Are there any specific use cases where multi-signature wallets are recommended?

These wallets are implemented to mitigate the risk of crypto theft that can arise when a single individual’s password or wallet key is sufficient to access the funds. Multi-sig wallets are typically most appropriate for businesses or collectively owned crypto assets, and they might not be necessary for most individual users.

Can multi-signature wallets prevent unauthorized transactions or hacking attempts better than single signature wallets?

On the contrary, multisig wallets necessitate a minimum of two private keys to sign a transaction, rendering them more secure than their single-signature counterparts.

January 22, 2024

Blockchain infrastructure stands as a pivotal technology in the Fourth Industrial Revolution, erasing the boundaries between physical and digital realms. It introduces innovative opportunities and disrupts established businesses by fostering decentralized digital transformation.

This decentralization is realized through establishing trust among parties and removing intermediaries, facilitating efficient data sharing and value exchange.

While commonly linked with cryptocurrencies like Bitcoin, blockchain’s applications extend beyond finance to encompass diverse business sectors such as agriculture, mining, manufacturing, energy, supply chains, and healthcare.

Despite utilizing security measures like cryptography, securing the extensive architecture of web3 blockchain and addressing cyber threats requires additional diligence.

Public vs private blockchain security

To further explore blockchain security, understanding the distinction between public and private blockchain security is essential. Blockchain networks can vary in terms of participation and data access, leading to the categorization of networks as Public and Private.

Public blockchain networks are open. They enable any user to join while preserving participant anonymity.

Private blockchain networks use identity verification for membership and access privileges. It exclusively allows known organizations to participate.

 

Why prioritize cybersecurity in blockchain?

The web3 blockchain cryptocurrency technology presents significant business opportunities. But, it also comes with notable risks. Cryptocurrencies, a key application of web3 blockchain, are increasingly being utilized in criminal activities such as ransomware, scams, and terrorism financing. On the other hand, it reached a market value of $14 billion in 2021—an alarming 79% increase from 2020.

Additionally, the adoption of blockchain and associated technologies such as hardware wallet for cryptocurrency introduces novel cybersecurity threats, each presenting unique security challenges. Consequently, cybersecurity should be a paramount consideration when embracing and utilizing blockchain.

Despite being grounded in established cryptographic technologies, blockchain is sometimes erroneously perceived as inherently secure. However, the cryptographic features it inherits are insufficient to withstand the full spectrum of cybersecurity threats.

Researchers have identified approximately 500 cybersecurity attacks, focusing solely on cryptocurrencies, resulting in losses of around $9 billion. Safeguarding against these attacks with the help of sophisticated wallets for cryptocurrency is particularly challenging due to blockchain’s decentralized and open nature.

The inherent characteristics of decentralization and openness increase operational complexity and limit the ability to achieve absolute control. Thus, a comprehensive assessment is imperative to guard against cybersecurity threats and associated vulnerabilities.

Blockchain security issues and solutions

Miners play a crucial role in advancing blockchain infrastructure by validating transactions. But a 51% attack poses a massive threat, particularly in the early stages of a web3 blockchain. This threat isn’t applicable to enterprise or private blockchains. In a 51% attack, malicious entities control over half of the hash rate, enabling them to manipulate transactions, disrupt confirmations, and even reverse completed transactions, leading to double-spending.

To mitigate 51% attacks: enhance monitoring of mining pools, ensure a higher hash rate, consider alternatives to proof-of-work (PoW) consensus procedures, lack of security vulnerability coverage, lack of code scanning and security testing.

In a Sybil attack, hackers create multiple counterfeit blockchain cryptocurrency network nodes to gain majority consensus and disrupt chain transactions, essentially resembling a 51% attack. To eliminate Sybil attacks: web3 blockchain should implement suitable consensus algorithms. Monitor nodes for suspicious behavior, particularly those forwarding blocks from a single user. While these measures may not entirely eliminate the risk, they render Sybil attacks impractical for hackers to execute.

Phishing Attacks

In a phishing attack, hackers aim to steal user credentials by sending seemingly legitimate emails to wallet key owners. These emails often contain fake hyperlinks prompting users to enter login details, posing risks to both users and the blockchain network. To prevent phishing attacks: Enhance browser security with verified add-ons or extensions that notify about unsafe sites. Bolster device security with malicious link detection and reliable antivirus software. Verify email requests for login details by confirming with support or partners. Exercise caution with links; instead of clicking, manually enter addresses into your browser’s private tab after thorough review. Plus, try to use a hardware wallet for cryptocurrency storage.

Private Keys

As previously highlighted, public-key cryptography is fundamental to blockchain technology. Mishandling or improperly implementing public-key cryptography can lead to severe security issues in blockchain infrastructure.

Inadequate key signing implementation, such as using the same key for multiple signings instead of a Merkle tree, may expose your private key to attackers. Possessing the private key grants control over all associated data in the blockchain, including cryptocurrency ownership. Although the likelihood of such incidents is low, using vulnerable code increases the risk. The primary concern lies in mishandling the private key, such as storing it on infected computers or public platforms. In 2020, approximately $300k worth of cryptocurrency was compromised when a user left their public key in Evernote.

Lack of Security Vulnerability Knowledge

Smart contracts are essentially coded agreements utilizing blockchain for keeping immutable records of transaction and ownership. In a real-world scenario, lending money involves periodic interest until the loan term concludes, at which point the principal is returned. This concept is coded, substituting cryptocurrency for traditional currency. The advantage is the absence of intermediaries like banks, and once the contract is established, it becomes immutable. However, poorly coded contracts can be vulnerable to exploitation. A notable instance was the DAO, where an attacker identified a flaw, resulting in the theft of $50 million worth of blockchain cryptocurrency.

Operational risks

Governance and Regulatory compliance problems are among the two major operational risks. Blockchain’s ambiguous governance systems complicate security matters. The absence of clear governance makes decision-making about the network’s direction and maintenance challenging, potentially resulting in conflicts and security risks. Regulatory compliance, especially with laws like Know Your Customer (KYC) and Anti-Money Laundering (AML), becomes crucial to prevent scams and protect users’ assets as Ethereum, Polygon blockchain gains popularity.

Despite the decentralized design of web3 blockchain, practical implementation often leans towards centralization. This means a limited group controls the majority of the network’s processing capacity, posing significant security concerns.

Other concerns :

Interoperability is another problem that exists in blockchain infrastructure. The ability of different web3 blockchains to communicate and share data is termed blockchain interoperability. Lack of interoperability, leading to fragmentation, can pose security risks by complicating the monitoring and verification of transactions across diverse blockchains. Scalability is a significant challenge for blockchain, particularly as its usage expands. The increasing demand for computing power and bandwidth with a growing user base may result in bottlenecks and network congestion.

Quantum computing, a new paradigm, raises concerns about the potential compromise of the encryption algorithms used in blockchain. This introduces a security risk, as it could expose blockchain technology to potential hacker attacks.

Conclusion

Preparing for the evolving landscape of digital protection is vital as blockchain cryptocurrency technology advances. To enhance blockchain security, individuals and groups can take various actions: Stay informed about new security tools and emerging threats. Establish transparent governance frameworks for swift decision-making and accountability. Invest in cutting-edge security tools such as encryption and multi-factor authentication. Regularly audit smart contracts and other blockchain components to identify and address vulnerabilities. Implement robust authentication and access control measures to safeguard private keys and prevent unauthorized access.

In conclusion, while blockchain has transformative potential across sectors, it introduces significant security risks. Proactive measures addressing these concerns are essential to ensure that blockchain technology remains a secure and reliable platform in the future of digital security.

 

FAQ

What are the security issues with blockchain?

One of the prominent security issues with web3 blockchain is sybil Attacks. A significant Sybil attack essentially equates to a 51% attack. To counter security concerns like Sybil attacks, numerous blockchain infrastructures employ proof-of-work and proof-of-stake algorithms. Although these algorithms don’t entirely eliminate the possibility of such attacks, they render them impractical for potential attackers.

What is the scope of blockchain in 2023?

A notable trend in 2023 is the increasing adoption of blockchain such as polygon blockchain in enterprise operations. The decentralized structure of web3 blockchains enhances security, transparency, and resilience against cyber threats. Consequently, more companies are anticipated to harness this technology for its advantages in the coming year.

How many blockchains are there 2023?

As of 2023, the market hosts more than 1,000 circulating blockchains, serving a diverse array of industries and applications.

What are the 4 major blockchains?

Diverse applications necessitate distinct web3 blockchain types. The primary classifications include public blockchains, private blockchains, consortium blockchains, and hybrid blockchains, each tailored to specific use cases.

How big is the blockchain market in 2024?

The entire blockchain market is estimated to be approximately $ 7.5 billion in the year 2022. 

What is the fastest blockchain 2023?

Currently, Coreum leads with a speed of 7,000 TPS, followed by Solana with over 4,000 TPS, and Aleph Zero impressively reaching 100,000 TPS. The speed, scalability, and efficiency of blockchain have emerged as crucial considerations for developers and businesses amid the industry’s expansion.

What happens to crypto in 2024?

The Bitcoin halving event in April 2024 signifies a unique event that occurs every four years. It results in a significant reduction in the rate of the cryptocurrency’s supply, as the reward for miners contributing a block to the Bitcoin blockchain is halved.

January 22, 2024

Global treasury management experts often encounter a common dilemma: effectively handling digital assets and cryptocurrencies like Bitcoin, Ethereum alongside traditional fiat currencies and other financial instruments. The complexity escalates when cryptocurrencies serve dual roles in daily business operations and investment portfolios. Yet, with a solid grasp of the fundamentals of cryptocurrency treasury management, the perceived challenges of incorporating digital assets into balance sheets become more manageable. Here, we discuess the intricacies of day-to-day Corporate Crypto Treasury management for finance teams, covering aspects from the underlying technology to risk management considerations and best practices, providing insights to navigate the integration seamlessly.

What is Crypto treasury management?

The management of a crypto treasury involves strategizing investments, overseeing performance, assessing crypto treasury policies, and utilizing cryptocurrency assets held by individuals, DAOs, or companies. This process takes into account various internal and external factors, including cash flows, expenses, regulatory compliance, and market risks.

The decision-making pertaining to the treasury is generally overseen by the project’s founders and core team or is dictated by decentralized mechanisms, contingent on the project’s governance structure. These strategic decisions and actions offered by blockchain-based treasury solution providers are essential to maintain financial stability, ensuring the smooth operation of the company.

Core Components of Crypto Treasury Management

Cryptocurrency Wallets: Serving as a fundamental tool for overseeing digital assets, cryptocurrency wallets serve as a secure gateway for sending, receiving, and storing cryptocurrencies.

Risk Management: Given the inherent volatility and uncertainties in the crypto space, adept risk management plays a crucial role in safeguarding assets and ensuring long-term sustainability.

Compliance and Regulation: Navigating the ever-evolving Regulatory Compliance in Crypto Treasury landscape is essential to ensure adherence to regulations governing digital assets.

Accounting and Reporting: Transparent accounting practices and robust reporting mechanisms are vital for maintaining trust and upholding financial standards in the management of digital assets.

How does crypto treasury management differ from traditional treasury management? 

There are several distinctions between the two. Typically, companies handle the collection and storage processes for traditional currency and assets separately from those used for cryptocurrencies. When using traditional currency for transactions, the company manages these assets differently than when utilizing cryptocurrency for the same purposes.

Furthermore, traditional currency and cryptocurrency fall into different asset classes, leading to variations in accounting practices. Unlike well-established regulations for traditional assets, those governing cryptocurrencies are still evolving rapidly and remain incomplete. Additionally, crypto assets and crypto financial products, being more volatile than traditional assets, necessitates businesses to implement processes to effectively manage associated risks.

Benefits of Crypto Treasury Management

Leveraging the capabilities of blockchain and cryptocurrencies yields a multitude of advantages.

Increased Efficiency: Automation of routine tasks and the swift nature of blockchain transactions contribute to a substantial increase in overall efficiency.

Enhanced Security: The cryptographic foundations of blockchain technology create a robust layer of security, effectively safeguarding against fraud and unauthorized access.

Real-time Monitoring: The inherent transparency of blockchain enables seamless real-time monitoring of transactions and asset positions, placing this information readily at one’s fingertips.

Challenges and Solutions

As previously mentioned, many companies opt for the agency model in their Digital Asset Investment Strategies, primarily to circumvent challenges associated with the direct model. With the agency model, where an agent collects and converts crypto payments to fiat currency, companies can avoid the complexities of managing the crypto collection and storage process. Conversely, those choosing to retain complete control of their crypto assets face accounting, regulatory, and liquidity challenges.

Accounting: Companies adopting the direct model typically categorize crypto assets as either ‘Current Assets’ or ‘Long-Term Assets,’ necessitating inclusion on the balance sheet. However, the accounting for crypto assets is intricate due to the absence of universally accepted standards. While most accountants agree that crypto shouldn’t be treated as a “cash or cash equivalent,” it is considered an intangible asset. As such, its value should be marked down over time and not marked up until sold, following specific accounting practices under US GAAP.

Regulation: Currently, there are limited regulations governing cryptocurrencies, DAO treasury management services, and Crypto Exchange Services, reflecting the decentralized and economically free nature for which they were created. However, recent events, such as the FTX collapse, suggest impending government regulation. Companies managing crypto assets and Crypto Custody Services are gradually adapting to evolving regulatory landscapes.

Liquidity: Liquidity challenges in crypto treasury management are more related to crypto exchanges and tokens than corporate treasuries themselves. Instances like the FTX and Terra collapse highlight issues where exchanges and stablecoins lack sufficient liquidity and diversification. Panic selling triggered by significant sales of the native token can lead to a cascade effect, causing a collapse. Corporate treasuries holding such cryptocurrencies may suffer substantial losses, emphasizing the ongoing challenge of Crypto Risk Management of collapse for treasury managers.

Best Practices

We briefly noted the distinctions between crypto and traditional treasuries, acknowledging a gradual convergence between the two. The dynamic nature of the crypto landscape, marked by continuous evolution and innovative approaches, contrasts with fixed conventions. Nonetheless, Cryptocurrency Treasury Management institutions have incorporated certain practices from traditional methods. Let’s delve into these adaptations.

Regulatory Compliance 

As regulatory scrutiny looms, authorities are increasingly turning their attention to the crypto sector to address concerns related to money laundering, terrorist financing, investor protection, and market integrity. In order for crypto treasuries to uphold trust, legitimacy, and long-term viability, transparency becomes a crucial factor. Consider the following compliance recommendations:

Understand the Regulatory Environment: Stay informed about Regulatory Compliance in Crypto Treasury relevant to the jurisdictions where crypto treasuries operate. This involves adherence to Know Your Customer (KYC) and Anti-Money Laundering (AML) laws, meeting reporting obligations, and ensuring tax compliance. 

Follow Expert and Regulatory Actions: Keeping up with the recent developments by monitoring actions taken by experts and regulatory bodies in your region. This proactive approach helps in aligning with evolving regulatory expectations and Crypto Treasury Policies.

Utilize Compliant Technology: Employ Corporate Crypto Treasury management systems and tools equipped to streamline compliance processes. These tools should incorporate features such as transaction monitoring, Crypto Risk Management, and reporting capabilities tailored to the unique requirements of the crypto industry.

Risk Management Strategies

Cryptocurrency is renowned for its heightened volatility in comparison to traditional financial assets. Managing a crypto treasury demands a comprehensive understanding of the distinct risks associated with digital assets, encompassing market volatility, regulatory ambiguity, and cybersecurity threats. 

While both realms involve risk, traditional treasury management typically operates in a more stable and regulated environment, benefiting from established teams dedicated to risk mitigation. Consider the following tips for navigating risks effectively:

Identify Risks: Conduct thorough risk assessments, analyzing internal and external factors that could impact crypto treasury operations and financial stability. This process encompasses evaluating market, liquidity, credit, legal, regulatory, and operational risks.

Develop Risk Mitigation Strategies: Tailor strategies to the specific needs and circumstances of the crypto treasury. These may include diversification, hedging, robust internal controls, continuous monitoring, and evaluation.

Collaborate with Risk Management Experts: Engage with Blockchain-Based Treasury Solution professionals specializing in risk management. Their expertise in crypto financial products can offer valuable insights, aid in identifying and assessing risks, and propose appropriate risk mitigation strategies, modeling, tools, and technologies.

Asset Allocation and Diversification

Asset allocation entails strategically dispersing a crypto treasury’s funds across diverse assets and wallets to optimize the balance between risk and return. Many DAO treasury managements and organizations find their assets tied up in native tokens, limiting the ability to sell without impacting prices and risking a loss of voting rights. Despite these challenges, Crypto Custody Service providers and crypto treasury managers can mitigate concentration risk by diversifying assets across various holdings. Strategies for Diversifying Crypto Assets:

Hold Crypto and Stablecoins: Diversify holdings by allocating funds across a spectrum of cryptocurrencies, including established ones like Bitcoin, Ethereum, Polygon, and proven altcoins. Allocating a portion of the treasury to stablecoins can provide a risk buffer during market turbulence.

Non-Crypto and Derivatives: Explore diversification by allocating a segment of the treasury’s assets to traditional fiat currencies or investment-grade securities. Additionally, consider using derivatives such as options or futures to gain exposure to crypto assets offered by crypto exchange services while managing risk.

Monitoring and Rebalancing: Given the volatility of the crypto market, the relative value of different assets within the treasury may fluctuate. Establishing clear guidelines and thresholds for rebalancing is crucial. This involves adjusting digital asset investment strategies and the allocation through buying or selling assets to align with the desired target allocation, taking into account risk preferences, investment objectives, and prevailing market conditions.

Future of Crypto Treasury Management

Navigating through unexplored territories, the horizon holds great promise.

Technological Advancements: The emergence of innovative technologies such as smart contracts and decentralized finance (DeFi) platforms is poised to intricately reshape and advance the landscape of crypto treasury management.

Regulatory Progress: As legal frameworks continue to mature, they will play a pivotal role in facilitating broader adoption and fostering increased trust among stakeholders.

Conclusion

Effective treasury management holds significance for any entity issuing a controlled-supply token. This aspect is poised to gain increasing prominence in the ongoing evolution of cryptocurrencies, emerging as a topic that is likely to be discussed, researched, and experimented with more frequently.

 

FAQ

What is treasury management in crypto?

A cryptocurrency treasury management commonly denotes the collection of digital assets owned and managed by an individual or organization. It serves as the reservoir of cryptocurrency under the control and ownership of the specified entity.

How does treasury manage liquidity?

Corporate Crypto Treasury liquidity management includes creating and executing strategies aimed at enhancing cash flow. These approaches encompass expediting collections, trimming expenses, overseeing inventory levels, and negotiating advantageous payment terms with suppliers.

How do I track crypto transactions for taxes?

To file your cryptocurrency taxes effectively, follow the following five steps: Begin by calculating your gains and losses from crypto transactions. Proceed to fill out IRS Form 8949, capturing the detailed breakdown of your cryptocurrency activities. Sum up the totals from Form 8949 on Form Schedule D. Don’t forget to incorporate any income derived from cryptocurrency. Finally, conclude the process by completing the remaining sections of your tax return. These steps ensure a comprehensive and accurate representation of your cryptocurrency-related financial activities in compliance with tax regulations.

What are the tax rules for crypto?

Profits derived from cryptocurrency trading are liable to a 30% tax rate (plus a 4% cess) in accordance with section 115BBH. Moreover, any transfer of crypto assets on or after July 1, 2022, involving amounts of Rs. 50,000 or Rs. 10,000 in certain cases is subject to a 1% Tax Deducted at Source (TDS) under section 194S.

How can I avoid paying tax on crypto in India?

In India, you have the opportunity to reduce crypto gains tax by adopting strategies such as holding investments for an extended period (beyond 3 years) to qualify for the lower long-term capital gains tax rate. Additionally, leveraging tax-saving investment tools like Section 80C or seeking personalized advice from a tax professional can contribute to potential savings on crypto gains tax. 

Which country has no tax on cryptocurrency?

Singapore stands out as a favorable jurisdiction for crypto taxation, benefiting both individuals and Blockchain-Based Treasury Solution providers. The absence of a Capital Gains Tax in Singapore means that neither individual investors nor businesses are obligated to pay such a tax. Consequently, when you sell or trade cryptocurrency and dispose of it, there is no Capital Gains Tax imposed in Singapore.

What is crypto tax penalty in India?

Acquiring cryptocurrency incurs a 1% Tax Deducted at Source (TDS), typically handled by the exchange, with exemptions for international and peer-to-peer transactions. When selling crypto, a 30% tax is applied to any profits. The same tax rate is also applicable when trading one cryptocurrency for another or when utilizing crypto for transactions, where a 30% tax is levied on any gains.

January 18, 2024

Worldwide, regulatory bodies have established rigorous laws and guidelines to oversee the movement of money, aiming to combat illicit activities such as money laundering, fraud, and the financing of terrorism.

Despite these efforts, a surge in high-profile scandals, exemplified by incidents like the FinCEN Files, exposes significant compliance failures within top financial institutions. The United Nations estimates that approximately 2–5% of global GDP, amounting to $800 billion to $2 trillion dollars annually, is involved in money laundering—a figure that could be double the total market capitalization of the web3 blockchain-based cryptocurrency sector. The imperative for effective compliance systems is more evident than ever.

In the traditional finance sector (TradFi), centralized systems play a pivotal role in monitoring transactions and ensuring compliance. However, compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations imposes substantial costs in terms of compliance specialists’ salaries and operational expenses.

The collective expense of financial crime compliance measures surpasses a quarter of a trillion dollars annually and continues to rise. Solutions such as transaction screening can help combat such challenges. 

What is Transaction Screening?

Transaction Screening scrutinizes transactions for suspicious or prohibited activity prior to approval. If the analysis of the respective blockchain infrastructure verifies illicit or excessively risky behavior, the transactions are halted. This is crucial for thwarting blatant attempts to circumvent regulations, including international sanctions. Additionally, it contributes to a layered, risk-based approach to Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) due diligence.

What are the Benefits of Transaction Screening?

Transaction screening of blockchain cryptocurrency is crafted to prevent financial crimes effectively. To accomplish this, it scrutinizes various aspects of a transaction, ensuring it is not conducted on behalf of sanctioned individuals or within restricted jurisdictions. Some advantages of digital crypto wallets with transaction screening capabilities include:

  1. Facilitating real-time detection of criminal transactions by financial institutions.
  2. Speeding up the remediation process.
  3. Flagging suspicious activities for further investigation on Ethereum and polygon blockchain.
  4. Assisting financial institutions in meeting regulatory requirements.

A crypto or defi wallet with a robust transaction screening system creates obstacles for criminals. Plus, employing thorough monitoring, screening, and analysis of extensive information allows you to make informed decisions based on available data.

Why transaction screening is required in Web3?

Transparency is more than just a trend in the blockchain cryptocurrency industry. It is a fundamental element of regulatory compliance. Within the cryptocurrency industry, Web3’s inherent transparency arises from its public and immutable blockchain records. This characteristic proves instrumental in risk management, facilitating the comprehensive due diligence necessary for monitoring cryptocurrency transactions. Employing machine learning, the best web3 crypto enterprises can efficiently sift through transaction data, identifying potentially suspicious activities that may signal money laundering or involvement with sanctioned entities.

In the pursuit of cryptocurrency compliance, forward-thinking Web3 companies bear the responsibility to proactively align with regulations. This involves adopting wallets for cryptocurrency with advanced transaction monitoring software, implementing know your transaction (KYT) protocols, and consistently updating their anti-money laundering (AML) solutions.

The traditional financial sector has long grappled with the imperative for rigorous compliance, particularly to attract institutional investors. In the realm of Web3 and the broader blockchain cryptocurrency industry, compliance transcends being merely a regulatory necessity; it stands as a competitive advantage. Institutional investors prioritize reliability, and crypto compliance offers precisely that, leveraging both custodial and non custodial wallets with advanced anti-money laundering (AML) solutions and transaction monitoring software.

Transparency emerges as a pivotal factor in gaining the trust of institutional players. The openness of web3 blockchain data establishes a level of trust often absent in traditional financial systems. With a transparent ledger of cryptocurrency transactions, institutions can conduct their own thorough due diligence. This approach provides unparalleled depth, enabling them to assess the effectiveness of a Web3 business’s risk management strategies and ensuring they avoid involvement with financial crimes or money laundering activities.

Best integrations available for Transaction screening for Institutions

Comply Advantage 

Comply Advantage’s payment screening is available as a standalone solution or as part of the broader Comply Advantage suite for fraud and anti-money laundering (AML) risk detection. Clients can conduct real-time screening of all major transaction types through a RESTful API.

Key Comply Advantage Features: 

  1. Real-time Screening: Prevent delays and ensure efficient processing by screening transactions in real-time.
  2. Optimized Algorithms: Utilize algorithms calibrated to Comply Advantage’s data for fast, accurate screening, increased flexibility, and higher straight-through processing (STP) rates.
  3. Tailored Risk: Adjust the screening process based on your firm’s unique risk appetite and compliance requirements.
  4. Flexible Integration: Seamlessly integrate with various payment systems and data sources, either in batch or real-time.

LexisNexis

LexisNexis, as per Crunchbase, provides content-enabled workflow solutions in various markets, including legal, risk management, corporate, government, accounting, and academic sectors.

Top LexisNexis Transaction Screening Features: 

  1. Advanced Linguistic Analysis: Allows payment data to be compared with any sanction or watchlist.
  2. Over 40 Algorithms: Tailor transaction screening to specific requirements.
  3. SWIFT Compatible: Recognized with the SWIFT Alliance Screening Add-on Label since 2001.
  4. API-First Approach: Supports integration with existing systems.

Napier 

Napier, described as a new breed of financial crime compliance technology specialist on Crunchbase, offers innovative financial crime compliance technology.

Top Napier Payment Screening Features:

  1. AI Advisor: Supports rules and manual reviews by identifying false positives and providing explanations.
  2. Flexible Configuration Engine: Allows screening against any list or payment field.
  3. Natural Language Processing and Advanced Matching Algorithms: Supports eighteen languages, including Arabic and Simplified Chinese.

Automating process for efficiency with the best web3 crypto Transaction Screening platform:

Every business should establish a comprehensive Anti-Money Laundering (AML) / Financial Crime Compliance (FCC) program, incorporating sanctions screening to mitigate the associated risks related to sanctioned parties and non-compliance.

This process includes:

Risk Identification: Determine the specific sanctions risks relevant to the business, considering global and local sanctions policies. Assess risks associated with the organization’s products, services, and relationships, such as cross-border payments requiring compliance with sanction requirements.

Data Cleanup and Streamlining: Address issues of data quality, integrity, and completeness to prevent false positives and enhance screening performance. Compile and clean Know Your Customer (KYC) information, linking and integrating data sources to achieve a holistic customer view.

Relevant Attributes for Screening: Identify and determine which data elements are pertinent for screening against specific sanctions risk.

Sanctions Data/Screening Setup: Establish a risk-based assessment of transactions over Ethereum and polygon blockchain to determine relevant sanctions lists. Implement list management systems to manage and reduce false positives. Ensure timely updates of lists and enhance data with additional information.

Screening Intervals: Define screening intervals based on internal policies, with screening during new relationship establishment and regular intervals or trigger events. Perform transaction screening of the entire blockchain infrastructure before potential violations, paying attention to points in the transaction process susceptible to information alteration.

Handling Matches: Recognize that an alert during screening indicates a potential match but doesn’t confirm a sanctions risk. Manually review client identity information against the sanctions list. Approach the client for additional information if needed. If a positive match is confirmed, report to the internal compliance or reporting officer, suspending all transactions. If the match is deemed a false positive, consider whitelisting the client’s name to prevent future matches.

Transaction screening fosters within the Web3 ecosystem

Advanced Crypto Compliance: Real-Time Analysis and Case Management

A state-of-the-art crypto compliance solution surpasses the basic task of flagging suspicious activities. It leverages real-time analysis, enabling financial institutions to promptly recognize abnormal patterns in customer transactions.

This capability facilitates swift detection of unusual activities, contributing to a reduction in false positives. Additionally, robust case management features empower compliance teams to monitor ongoing investigations and coordinate actions seamlessly.

Thorough crypto/ defi wallet screening and Know Your Transaction (KYT) Protocols

In adhering to rigorous anti-money laundering (AML) and risk management standards, an advanced platform incorporates robust digital crypto wallets screening functionalities. It autonomously cross-references crypto addresses with a database encompassing sanctioned entities, high-risk jurisdictions, and other flagged accounts. Know Your Transaction protocols complement this by supplying detailed contextual information for each transaction.

Scalable Solutions

Optimal Ethereum crypto or polygon staking wallet transaction monitoring solutions are crafted for scalability, adeptly managing a high volume of transactions without sacrificing speed or efficiency. Furthermore, they provide customizable settings to align with the specific compliance policies and procedures of an institution.

Integrated Machine Learning for Enhanced Monitoring

The monitoring framework incorporates machine learning capabilities to analyze and anticipate emerging threats. This proactive approach enables the system to adjust to evolving forms of financial crimes. Transaction monitoring tools must continually evolve to remain at the forefront of the battle against money laundering.

 

The Evolution of Transaction Monitoring: Future Trends

The financial landscape is undergoing rapid transformations, driven by technological advancements, shifting consumer behaviors, and evolving regulatory frameworks. This dynamic environment is reshaping the way financial transactions are conducted and monitored. Looking ahead, several key trends are poised to shape the future of transaction monitoring.

Artificial Intelligence and Machine Learning: Artificial intelligence and machine learning are designed to play a pivotal role in the future of transaction monitoring. These technologies excel in analyzing vast amounts of transactional data in real-time, identifying intricate patterns, and adapting to emerging forms of illicit activity. For instance, machine learning algorithms can leverage historical transaction data to predict the likelihood of new transactions being fraudulent. This heightened accuracy is expected to reduce false positives, allowing financial institutions to deploy investigative resources more efficiently.

Real-time Transaction Monitoring: With the escalating volume of digital transactions, real-time monitoring is gaining increased significance. Real-time systems can swiftly detect suspicious activity as it unfolds, enabling prompt intervention and mitigating the risk of financial loss. Advances in computing power and data processing technologies are making real-time transaction monitoring not only more feasible but also more effective. 

Integrated Compliance Solutions: Transaction Screening is just one facet of a broader compliance framework that encompasses customer due diligence, sanctions screening, and reporting. In the future, we anticipate a rise in integrated web3 blockchain transaction screening solutions that consolidate these components into a unified platform. This holistic approach promises a comprehensive view of risk, fostering more consistent and efficient compliance measures.

Conclusion

The significance of transaction screening is increasing daily, driven by the increasingly sophisticated methods employed by criminals. It plays a crucial role in meeting compliance requirements and identifying money laundering activities in real time, distinguishing it from other anti-money laundering (AML) strategies. Nevertheless, as a standalone AML measure, transaction screening may not be highly effective. To maximize effectiveness, it should be implemented in conjunction with other strategies and supported by trained compliance agents.

FAQ

Why is transaction screening important?

Transaction screening involves the examination of transactions to identify any suspicious or prohibited activity prior to approval. If the analysis detects illicit or excessively risky behavior, the transactions are halted. This process is essential for preventing blatant attempts to circumvent regulations, including international sanctions.

Why is sanction screening important?

Transaction Screening safeguards national security objectives by obstructing the transfer of funds to individuals or entities that could potentially pose a threat to specific nation-states.

What are the risks of sanction screening?

Transaction screening has the capacity to limit trade with certain individuals, groups, agencies, and entities across various industries. Non-compliance with sanctions screening may result in significant consequences, including substantial fines and potential criminal proceedings.

What are the roles and responsibilities of payment screening?

Efficient web3 blockchain transaction screening aids financial institutions in identifying and preventing fraudulent activities. Through the analysis of transaction patterns, risk assessments, and cross-referencing names with sanctions lists, any suspicious transactions can be pinpointed and elevated for additional investigation.

What does transaction screening include?

Transaction screening constitutes an integral component of a comprehensive anti-money laundering and counter-terrorist financing (AML/CFT) framework. Alongside customer identification and verification, transaction monitoring, and regulatory reporting, transaction screening plays a crucial role in enabling firms to conduct thorough due diligence and adhere to robust compliance processes.

What is the purpose of screening in KYC?

 The screening procedure includes gathering customer information through Know Your Customer (KYC) procedures, which entail verifying customer identities and evaluating their risk levels. After acquiring the customer information, the subsequent step involves conducting checks for customer due diligence.

January 18, 2024

Crypto-assets and their markets necessitate robust regulation and oversight that aligns with the risks they present. The rapid evolution of crypto-asset markets raises concerns that they could, at a certain point, pose a threat to global financial stability due to their scale, structural vulnerabilities, and growing interconnectedness with the traditional financial system. The international nature of these markets also introduces the potential for fragmentation or arbitrage. While the use of crypto assets varies across jurisdictions, the risks to financial stability could escalate quickly, highlighting the imperative for both timely and proactive assessments of potential policy responses and regulatory interventions where existing requirements are applicable.

An effective regulatory framework for crypto treasury management platform and crypto exchanges should ensure that activities involving crypto-assets are comprehensively regulated, taking into account the risks they pose, while also leveraging the potential benefits of the underlying technology. In cases where crypto-assets and intermediaries perform economic functions equivalent to those in the traditional financial system, they should be subject to regulations guided by the principle of “same activity, same risk, same regulation.”

Crypto as an non-regulated asset-class

Fundamentally, crypto assets are digital codes stored and accessed electronically, without necessary backing from physical or financial collateral. Their value may or may not be stabilized by pegging them to fiat currencies or other valuable items. The electronic life cycle of crypto assets introduces a full spectrum of technology-related risks that regulators are actively working to integrate into mainstream regulations. These risks include cyber threats and operational challenges, evidenced by notable losses due to hacking or inadvertent loss of control, access, or records.

Initially, concerns about these risks might have been mitigated if the crypto asset system had remained closed. However, this is no longer the case, as the crypto world now mirrors various functions in the financial system, including leverage, liquidity provision, lending, and value storage.

The diverse actual or intended uses of crypto assets attract the attention of multiple domestic regulators, each with distinct frameworks and objectives—ranging from consumer protection to safety and soundness or financial integrity. Additionally, various crypto actors, such as miners, validators, and protocol developers, pose a challenge to traditional financial regulation due to their unique roles and characteristics.

Entities operating in financial markets typically operate under specified conditions and defined scopes, with associated governance and fiduciary responsibilities. However, these principles may not seamlessly translate to participants in the crypto ecosystem, where identification can be challenging due to underlying technology or casual and voluntary involvement. Regulatory challenges also extend to addressing conflicting roles concentrated in centralized entities, such as crypto exchanges and crypto custodian platforms.

Moreover, as national authorities strive to develop a crypto treasury management regulatory framework for both companies and various activities in the crypto ecosystem, they must also take a stance on the underlying technology’s alignment with broader public policy objectives—such as addressing the significant energy consumption associated with “mining” certain crypto assets.

Applying existing crypto asset management regulatory frameworks to crypto assets, or creating new ones, is a formidable task for several reasons. The crypto world evolves rapidly, and regulators face challenges in acquiring the necessary talent and skills to keep pace amidst stretched resources and competing priorities. Monitoring crypto treasury management and trading markets is further complicated by patchy data, making it challenging for regulators to track the multitude of actors not subject to typical disclosure or reporting requirements.

Outlook of different jurisdiction towards crypto institutions

Cryptocurrency has been a contentious topic since its introduction, with varying perspectives among countries on its decentralized nature. Legal status and regulations around cryptocurrency asset management platforms differ across nations, and the use of cryptocurrency for anonymous global transactions has raised concerns for governments worldwide. Some officials are wary due to the lack of control and potential illicit ties associated with cryptocurrency.

Certain countries have introduced cryptocurrency regulations under their anti-money laundering and counter-financing of terrorism laws (AML/CFT) to curb the misuse of cryptocurrency for such purposes.

Let’s explore the legal status of cryptocurrency in different countries:

United Kingdom (UK)

The UK does not have specific legislation for cryptocurrency or cryptocurrency custodians but does not consider it legal tender; rather, it’s treated as property. The Financial Conduct Authority (FCA) regulates licensing for authorized cryptocurrency-related businesses. The UK applies firm rules, and businesses seeking a license must adhere strictly to them. Crypto trading in the UK is subject to taxes, following corporate tax rules.

United States (U.S.)

The U.S. operates under a dual governance system, with varying laws for cryptocurrency across different states. Some states, like New York, have been supportive of cryptocurrency and have implemented licensing frameworks, such as “BitLicense,” since 2016. While regulations vary among states, the overall stance in the U.S. is positive towards the trading community, making cryptocurrency and custodian crypto-platforms legal.

Canada

Canada adopts a cryptocurrency-friendly stance, treating cryptocurrencies as items for income tax purposes. Income or capital gains from cryptocurrency transactions must be reported to the Canada Revenue Agency (CRA). Canada has shown motivation in crypto regulations, becoming the first country to accept a bitcoin-traded fund (ETF). Crypto exchanges in Canada are considered money service businesses and fall under the Proceeds of Crime and Terrorist Financing Act, requiring registration under the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

European Union (EU)

The EU, consisting of 27 member countries, faces complexities in legislation at the union level. Most EU countries have adopted a soft regulatory framework for cryptocurrency. In 2020, the European Commission proposed legislation to regulate virtual assets, aiming to prevent fragmentation of financial regulatory frameworks and ensure secure access to cryptocurrency and different types of crypto currency wallets.

Countries where cryptocurrency is banned: China, Bangladesh, Egypt, Morocco, Nepal, Iraq, Tunisia, Qatar.

Anti-Money Laundering (AML) and Know Your Customer (KYC) Rules

In the swiftly evolving realm of cryptocurrency, proactively addressing financial risks is of utmost importance. There is widespread acknowledgment that ensuring AML/KYC compliance in the crypto ecosystem is increasingly crucial. This involves addressing key aspects such as monitoring crypto transactions, adhering to the Travel Rule in the crypto world, and protecting against crypto scams.

Regulators have taken note of the distinctive challenges posed by digital assets and crypto treasury management platforms. They have responded by establishing robust crypto asset management frameworks for cryptocurrency regulation. These crypto regulation frameworks encompass specific guidelines and obligations aimed at combating activities related to anti-money laundering within the crypto space.

For crypto exchanges and cryptocurrency wallet indian/ global providers, a comprehensive understanding of the intricacies involved in AML and KYC compliance processes is indispensable. As the crypto industry continues to grow, navigating the intricate landscape of financial security and regulatory requirements becomes vital to ensure transparency and foster trust among stakeholders.

Licenses Crypto Institutions can get to become regulated

A cryptocurrency license is an official document that authorizes businesses to participate in the cryptocurrency market, issued by regulatory agencies overseeing financial operations in specific countries.

Every business involved in crypto-related activities is required to hold the relevant license. This ensures that the crypto company can uphold the security of its customers’ crypto assets and adhere to relevant laws. Various types of crypto licenses, such as exchange, hardware wallet for cryptocurrency, and crypto custodian licenses, exist, and the criteria for obtaining one can vary significantly from one country to another.

Ensuring Legal Adherence

Securing a crypto regulation is crucial to avoiding legal complications. Crypto exchanges operate within a heavily regulated industry, making noncompliance a high-risk endeavor.

The absence of a valid cryptocurrency license exposes exchanges and cryptocurrency asset management firms to potential legal consequences, including substantial fines and the possibility of business closure. Possessing a license ensures strict adherence to all pertinent rules and regulations, enabling crypto treasury, custodian, exchange, and management businesses to operate within the bounds of the law without the threat of legal repercussions.

Building Trust and Credibility

Obtaining a cryptocurrency license plays a pivotal role in establishing a company as a reliable and credible entity in the eyes of customers. Consumers are more inclined to utilize the services of an exchange upon discovering that the company holds a legitimate license. This assurance signifies the exchange’s legitimacy and the protection of customers’ funds.

The credibility of cryptocurrency exchanges and cryptocurrency custodian receives a significant boost through licensing, indicating that the company has successfully undergone thorough regulatory scrutiny.

Facilitating Banking Relationships

Additionally, a cryptocurrency exchange and custodian crypto license can streamline the establishment of banking partnerships. Given the perceived risks associated with crypto activities, many banks are cautious about engaging with businesses in the cryptocurrency market by providing financial services. However, gaining credibility through a valid license is instrumental in fostering trust with banks, ultimately paving the way for essential banking relationships crucial to the success of any cryptocurrency exchange.

Cooperation on a global scale

Worldwide, research and development efforts are ongoing to establish regulations for different types of crypto currency. Numerous countries are in the process of formulating policies and legislation, although progress varies due to different reasons. Some nations have implemented partial cryptocurrency regulations, while others are actively working to comprehensively regulate the entire cryptocurrency space. For instance, in the U.S., crypto exchanges are already subject to regulations. Meanwhile, within the EU, laws are evolving to mandate that crypto service providers identify and prevent illicit uses of cryptocurrency.

Changing microeconomics of crypto regulations

As cryptocurrency plays an increasingly prominent role in the global investment landscape, countries have adopted diverse approaches to regulating this asset class. The European Union took the lead by implementing measures mandating crypto asset management service providers to identify and prevent illicit uses of cryptocurrency. In the United States, the Biden administration provided clarification on cryptocurrency use and regulation in 2022, setting the stage for the development of the digital dollar. Meanwhile, various countries apply different classifications and tax treatments to cryptocurrency.

How the future of crypto can evolve with better regulations 

The trajectory of cryptocurrency’s future will inevitably be influenced by the unfolding regulatory landscape. While the United States is just one among numerous jurisdictions grappling with how to navigate the realm of crypto, its pivotal role in global financial markets adds significant weight to legal battles involving platforms like Coinbase and Binance.

The repercussions of such legal actions were immediately evident, with several cryptocurrencies mentioned in the Coinbase lawsuit experiencing substantial value declines. In response, various institutions began adopting more cautious approaches. For instance, Robinhood, a widely-used investment app that has expanded into the cryptocurrency space, announced on June 9 that it would cease supporting transactions involving Cardano, Solana, and Polygon (MATIC) in response to actions taken by the Securities and Exchange Commission (SEC).

The idea of regulating cryptocurrencies similarly to other investment products categorized as securities may seem reasonable, considering the established precedent for stocks. However, cryptocurrencies have evolved into a distinct asset class without a comprehensive regulatory framework overseeing them. Consequently, categorizing them as securities and subjecting them to crypto regulation isn’t as straightforward as filling out a form, especially since such a form does not currently exist.

This classification could leave creators of cryptocurrency projects with limited options for keeping their products on the market. A case in point is the SEC’s settlement with the crypto exchange Kraken in February 2022, where allegations regarding its unregistered security staking program led to a $30 million payment and the cessation of the program as part of the resolution.

Conclusion

Despite cryptocurrency’s existence since 2009, governments and regulators are still in the process of devising effective governance strategies. It is imperative to safeguard consumers and businesses from fraudulent activities, necessitating the implementation of preventive measures against illicit uses of cryptocurrency. Although progress is underway in many countries, the process is slow and often surrounded by controversy.

FAQ

How Are Payments with Bitcoin Different than Credit Cards? 

Bitcoin transactions resemble cash exchanges, occurring directly between individuals without the involvement of financial intermediaries. While credit cards enjoy widespread acceptance, the process involves numerous intermediaries between merchants and customers, each charging fees for what they consider essential services.

Who Is the Crypto Regulator?

The Financial Conduct Authority (FCA) oversees the licensing of authorized businesses in the cryptocurrency asset management sector, including exchanges, within the currency system. Stringent rules are in place, and entities seeking a license must adhere rigorously to these regulations.

Are There Any Regulations on Crypto?

Within the existing legal framework in India, Virtual Digital Assets (VDAs) are neither explicitly regulated nor prohibited. Individuals and entities are permitted to possess, invest in, and engage in transactions involving VDAs, provided they adhere to the prevailing laws.

What are the challenges in regulating cryptocurrency?

One of the primary challenges faced by regulators is the precise classification of existing cryptocurrencies. The advent of crypto assets is a direct result of recent advancements in digital technology, introducing new opportunities for barter, investment, and financial transactions.

Why is regulation important in crypto?

Governments are acknowledging the necessity of addressing investor protection, market integrity, and potential risks linked to cryptocurrencies. Therefore, it is crucial to strike a balance between cryptocurrency regulation and innovation to guarantee the growth and sustainability of the industry.

What is the new regulation for crypto?

In the latest Union Budget for 2022, the Finance Minister introduced a tax framework for virtual or digital assets, encompassing cryptocurrencies. Investors in cryptocurrencies are obligated to disclose their computed profits and losses as part of their income reporting.

January 18, 2024

The Ethereum Virtual Machine (EVM) stands at the core of the Ethereum network. It is a groundbreaking open-source platform reshaping the blockchain technology landscape. Although initially designed for the Ethereum network, its significance extends beyond its native environment. Presently, numerous blockchain networks aspire to achieve EVM compatibility, drawn by its flourishing ecosystem of developers and decentralised applications (dApps).

The Ethereum Virtual Machine (EVM) serves as the dedicated runtime environment for Ethereum’s smart contract. It is designed to be sandboxed and isolated from other system components. This ensures that no operation within the EVM impacts your data or programs, regardless of how frequently a specific function is invoked.

The blockchain EVM is the runtime environment responsible for executing Ethereum smart contracts, utilising Ethereum’s Turing-complete scripting language, Solidity. To fulfil the execution of this code, the Ethereum Virtual Machine (EVM) comes into play. Positioned atop the Ethereum network, it operates in a manner that ensures consensus among all nodes regarding the code to be executed at any given moment.

Key Points to Remember:

  1. Ethereum’s Turing completeness distinguishes it from other blockchains, such as Bitcoin. This characteristic allows Ethereum to execute arbitrary logic, enhancing its versatility and functionality.
  2. Ethereum is not the sole EVM-compatible blockchain; several Layer 1 (L1) and Layer 2 (L2) chains share this compatibility. This feature facilitates seamless migration, contract deployment, and token transfers between various chains. Notable examples include Polygon, BNB Smart Chain, Avalanche, and more.
  3. The EVM plays a pivotal role in enabling developers to deploy decentralised applications (dApps) on the Ethereum network. This emphasis on decentralisation underscores Ethereum’s commitment to fostering a distributed and secure ecosystem for diverse applications.

What is an EVM-Compatible Blockchain?

An EVM-compatible blockchain serves as the backbone of the Ethereum blockchain, simplifying the development of decentralised applications and smart contracts while standardising wallet usage. As technological advancements unfold and the web3 blockchain progresses, the EVM blockchain is emerging as the preferred standard for developers.

Explaining the Ethereum Virtual Machine (EVM)

The Ethereum Virtual Machine (EVM) plays a pivotal role in the Ethereum blockchain ecosystem, functioning as the operational environment for running smart contracts and decentralised applications (DApps). Serving as a decentralised computing entity, the EVM chain operates across the global network of Ethereum nodes. Its primary responsibility is to process and execute code scripted in Ethereum’s native language, Solidity, or other compatible programming languages.

Fundamentally, the EVM is a Turing-complete, isolated execution environment. Its Turing completeness implies the capability to theoretically execute any computation, offering a versatile foundation for the development of diverse DApps. The EVM blockchain’s isolated nature ensures secure code execution, safeguarding the entire network against potential malicious threats. Ethereum developers compile their smart contracts into bytecode, which becomes immutable upon deployment on the blockchain, ready to be executed by the EVM.

Users and DApps engage with the EVM-based blockchain by transmitting transactions containing executable code to Ethereum addresses. These transactions prompt the EVM to execute the code, enabling interactions with and modifications to the Ethereum state (the distributed ledger). This mechanism facilitates the creation of decentralised applications with functionalities ranging from decentralised finance (DeFi) to non-fungible tokens (NFTs) and more.

The decentralised and deterministic execution of the EVM ensures that all nodes within the Ethereum network achieve consensus on the state changes resulting from these transactions. This process upholds the integrity and trustworthiness of the blockchain, establishing a reliable foundation for the Ethereum ecosystem.

Key terminologies in EVM and Their Functions

Smart Contract Components: These components, often referred to as “Uncles,” represent small fragments of smart contracts or data that reside on the blockchain. This feature proves valuable as it enables the storage of metadata about a program, enhancing the versatility of data management within the Ethereum ecosystem.

Actions: Fundamental operations applicable to assets stored in memory, excluding actions directly on the blockchain. Examples include multiplication and addition.

Balance: Signifies the amount of Ether an entity possesses at any given time. While not a variable, it serves as a memory section where the EVM-based blockchain stores data. Attempts to modify or read from it result in an error.

Block: Immutable storage capturing all actions and transactions related to Ethereum until the current block. With a fixed limit of 65,000 blocks, this structure remains constant.

Blockhash: A hash representing a specific block. Useful for referencing data stored under a different name on the blockchain.

Block Number: Indicates the position of the block in the blockchain. Beginning from zero, the block number increments with each newly added block, and associated timestamps reveal the time elapsed between two blocks.

Code: Executable blockchain EVM code determines actions when certain inputs occur, such as money transfers.

CodeHash: A hash representing the code itself, visible when inspecting a contract on platforms like Etherscan. This hash changes as functions execute, reflecting alterations based on inputs.

CodeSize: The actual size of the code measured in bytes.

GasLimit: An EVM blockchain component allowing users to specify the amount of gas they are willing to expend for an execution. If this number is zero, no action takes place, although such occurrences are rare.

How EVM Works

The Ethereum Virtual Machine (EVM) is a crucial component that executes scripts, carrying out specific operations within the Ethereum blockchain. It acts as a program facilitating the creation of new tokens on the Ethereum Blockchain. In the context of EVM-compatible blockchains, a script refers to a set of instructions or an algorithm that guides the computer on proper functionality. Access to any network node is a prerequisite for executing desired commands and seamlessly generating new tokens on the blockchain.

In the Ethereum ecosystem, smart contracts play a pivotal role, embodying computer code designed to enable the exchange of money and information. The Ethereum Virtual Machine provides a Turing-complete environment for executing these scripts and smart contracts, allowing any computation feasible on a computer to run on the EVM chain. Serving as the foundation for decentralised applications (DApps), the blockchain EVM ensures the correct and expected execution of transactions and smart contracts on the Ethereum blockchain, aligning with the predetermined logic set by the smart contract creator.

The Ethereum Virtual Machine consists of two integral parts. Firstly, the EVM, which is responsible for running Solidity’s source code, is written in C++ and utilises LLVM as its compiler. It offers a comprehensive virtual machine with features essential for a general-purpose Smart Contract Virtual Machine, supporting multiple programming languages, security features, runtime environments, and the ability to write custom EVM chain bytecode. Secondly, “Uncles” are small components storing smart contracts or data on the blockchain, providing a means to store metadata about programs. Additionally, blockchain EVM Assembly, the bytecode of the EVM blockchain, serves as a programming language for developers in the Ethereum ecosystem. In essence, the Ethereum Virtual Machine simplifies the creation and execution of DApps on the blockchain.

Advantages of EVM-Compatible Blockchains

EVM-compatible blockchains offer several advantages to developers engaged in crafting smart contracts and constructing decentralised applications (dApps):

Interoperability: Smart contracts and dApps formulated for one EVM-compatible chain, such as Ethereum, can be seamlessly transferred to other EVM-compatible chains, like Polygon, with minimal adjustments to the code.

Costs: The EVM establishes a standardised environment for writing smart contracts and developing dApps. This allows developers to write code once and deploy it on any EVM-compatible blockchain, eliminating the need for separate codebases for each chain. The use of Solidity, a widely adopted programming language for Ethereum, further reduces the learning curve across EVM-compatible blockchains.

Developer Ecosystem: Since dApps on EVM-compatible blockchains inherently operate on the Ethereum network, they gain access to its extensive user base of over 100 million unique wallets. This integration simplifies the process of achieving mass adoption for web3 applications built on EVM-compatible blockchain networks.

Decentralised Applications and Financial Systems on EVM Chains

The ongoing advancement of web3 emphasises the extensive utilisation of decentralised applications, particularly in the realm of decentralised finance (DeFi) exchanges and stablecoins. This necessitates swift transactions at reduced costs. The emergence of EVM-compatible layer-2 scaling solutions adds further value to the blockchain EVM’s adaptability.

An EVM blockchain operates in a decentralised manner, supported by a network of contributing computers or nodes. This decentralised structure ensures transparency and immutability, implying that once data is recorded on the blockchain remains unalterable and irremovable. This characteristic establishes a trustless environment for participants, thereby enhancing the overall security of the system.

Conclusion

In summary, EVM-compatible blockchains offer significant advantages by prioritising scalability and efficiency, all while being integrated into the Ethereum network and harnessing its full range of capabilities.

The EVM’s establishment of a standardised environment for decentralised applications (dApps) ensures that any application developed on an EVM-compatible blockchain is not only optimised for portability but also interoperable with other EVM networks. This interoperability facilitates seamless access to the expansive Ethereum ecosystem for all dApps constructed on these blockchains.

January 9, 2024

A self custody wallet is a crypto wallet that offers you complete control over your cryptocurrencies and digital assets, including Bitcoin, Ethereum, and VERSE. In contrast to custodial crypto wallets and traditional banks, where they hold your assets for you, a self-custodial wallet ensures that you maintain control, eliminating the need to trust others with the safe keeping of your assets. Various self-custody solutions exist, each differing in terms of security measures and user-friendliness. 

What is a Self Custody Wallet?

Self-custody wallets function as secure repositories for your private keys, serving as an interface for crypto management (the actual storage of which occurs on blockchains). These self-custodial wallets empower users to send and receive crypto and interact with decentralised applications (DApps). In a self-custody setup, you actively manage your private keys with the assistance of a trusted wallet provider, ensuring complete control over your assets.

In contrast, custodial wallets operate differently, with a third party—such as a centralised exchange (CEX)—controlling your private keys and, consequently, having custody of your crypto assets.

Regardless of the type, both self-custody and custodial wallets enable users to perform fundamental tasks like checking balances and reviewing transaction histories for their crypto addresses.

Understanding Private Keys:

In the world of cryptocurrencies, a private key bears similarity to a bank password. Possessing the crypto private key translates to control over the corresponding crypto assets on the blockchain.

Private keys serve as the foundation for generating public keys, which, in turn, create unique wallet addresses. Despite their mathematical linkage, it’s important to note that a private key can never be derived from a public key.

A public key is similar to a visible mailbox: its encrypted address allows anyone to send crypto to it. However, only the owner, armed with the private key, can unlock the mailbox and access the messages (cryptocurrency) within.

Introducing Seed Phrases:

Private keys, represented by lengthy strings of numbers and letters, symbolise ownership of crypto on a blockchain. Individuals may end up with multiple private keys based on the variety of digital assets they hold.

To streamline the accessibility of private keys, self custody wallet providers implement seed phrases. Typically consisting of 12 randomly selected words, these seed phrases grant access to your crypto wallet and all the associated private keys.

Possessing your seed phrase negates the need for individual private keys, as they are algorithmically interconnected. Effectively acting as a ‘master key,’ a seed phrase simplifies the management and security of your crypto assets.

Understanding Various Types Of Self-Custody Wallet

When selecting a self-custody wallet, it’s essential to be acquainted with the different types, with the primary distinction being between software and hardware wallets.

  • Software Wallets: A hot wallet is a cryptocurrency wallet that stays connected to the internet and the cryptocurrency network at all times. It is utilised for sending and receiving cryptocurrency, providing you with the ability to check the available tokens in your possession. 

Note: Caution should be exercised concerning “spoofed” browser extensions, a concern that will be elaborated on later.

  • Hardware Wallets: A hardware wallet is a physical device, often resembling a USB thumb drive, designed to securely store a crypto user’s private cryptographic keys in offline or “cold” storage. These keys are kept safe for later online use when conducting cryptocurrency transactions. Unlike traditional wallets for physical or fiat currency, a crypto hardware wallet does not hold the user’s actual coins. Instead, it safeguards the private keys necessary to access the coins on the blockchain. Many hardware wallets are versatile, supporting multiple blockchains simultaneously, enabling users to manage various types of coins from different exchanges on a single device. The data stored in a hardware wallet can be easily backed up using a single recovery phrase or PIN code.

Self-custody is critical for both Institutions and Individuals

In the traditional Web 2.0 financial system, we rely on centralized entities like banks and governments to safeguard our assets. When we deposit money in a bank, we give a third party control (custody) over our assets, trusting that the bank will have our money available for withdrawal later. In case of any issues, we trust that the bank is insured and our government will compensate for any losses.

Web3, on the other hand, allows you direct control over your assets, eliminating the need to trust banks and governments for custody. Although centralized crypto exchanges (CEXs) have emerged to provide convenient access and custody for cryptocurrencies, the essence of Web3 is about self-custody. Relying on a CEX still involves trusting a centralised corporation, similar to trusting a bank. While there is some centralisation in Web3, it comes with its own set of risks, as seen in the recent issues with the FTX centralized exchange. However, choosing self-custody through a wallet means you are solely responsible for your asset security since you control the private keys. It’s important to note that before CEXs existed, all crypto wallets were self-custody.

The tradeoff is evident: self-custody eliminates the need to trust banks, governments, or CEXs, but it requires trust in the decentralized systems you opt to use. You become solely responsible for safeguarding your private keys against loss and theft.

Advantages of Self-Custody

Self custody crypto wallet provides several notable benefits, including enhanced security and personal control over assets, as briefly mentioned earlier.

  • Censorship Resistance: Self-custody ensures that assets stored in a non-custodial wallet cannot be frozen or confiscated by external entities. This is particularly empowering in regions with capital controls or targeted discrimination, making self-custody a technology of empowerment.
  • Increased Security: Non-custodial wallets offer heightened security by allowing individuals to control their private keys. Unlike custodial wallets, where keys are stored on a potentially vulnerable central server, self-custody minimises risks associated with hacking or counterparty vulnerabilities.
  • Expanded Access: Self-custody can be liberating for unbanked individuals without access to traditional financial services. Even without conventional bank accounts or payment cards, self custody wallet enables them to use cryptocurrency for storing, sending, and receiving funds.
  • Greater Control: Individuals exercising self-custody have complete control over their funds, managing them according to their preferences. This stands in contrast to custodial wallets, where a third party manages the funds, potentially limiting individual control.
  • Decentralization: Non-custodial wallets align with the decentralized nature of many cryptocurrencies, allowing individuals to hold and manage their assets without reliance on a central authority. This promotes a more equitable and transparent financial system.
  • Privacy: Non-custodial wallets often require minimal personal information, enhancing privacy. This feature is crucial for those concerned about the potential misuse of their data.

In summary, self custody wallet presents numerous benefits for individuals seeking secure and private management of their cryptocurrency holdings.

The Significance of Self-Custody 

Self-custody holds paramount importance for several compelling reasons. Foremost among them is the heightened security it affords to your funds. By personally holding your assets, you eradicate the vulnerabilities associated with centralised third parties, including the risks of hacking, bankruptcy, or fraudulent activities.

In addition to providing security, a self-custody wallet empowers users to tap into the distinctive features of cryptocurrencies, particularly in the domain of decentralized finance (DeFi). DeFi opens avenues for crafting decentralized financial instruments like loans and insurance, free from control by any central authority. With self-custodial wallet, users gain the autonomy to actively participate in DeFi actively, capitalising on its manifold advantages.

Beyond financial empowerment, self-custody serves as a safeguard for user privacy. Retaining control over their own assets ensures that financial information remains confidential and beyond the reach of third-party entities, underlining the inherent value of self-custody in preserving individual privacy.

Ensuring the Safety of Your Self-Custody Wallet

When it comes to managing your own crypto, the paramount concern is the safety of your self-custody wallet. With the responsibility of securing your assets squarely on your shoulders, it’s vital to comprehend the associated risks and take proactive measures to mitigate them.

While self-custody does entail certain risks, there are numerous precautions you can adopt to fortify the security of your assets. Consider the following tips to safeguard your self-custody wallet:

  • Choose a Reputable Wallet Provider: Research and opt for a trustworthy self-custody wallet provider with a solid reputation. Scrutinise reviews, seek community feedback and prioritise providers that have undergone independent security audits.
  • Use a Hardware Wallet: Elevate your security by employing a hardware wallet—a physical device storing private keys offline. This significantly diminishes the risk of online attacks like hacks or phishing scams. Ensure you acquire it from official sources and verify the package for tampering upon receipt.
  • Secure Your Seed Phrase: Safeguard your seed phrase, the key to your crypto wallet, by inscribing it on paper and storing it in a secure location, such as a safe or safety deposit box.
  •  Enable Two-Factor Authentication (2FA): Provide your self-custody wallet’s security by implementing two-factor authentication options, such as biometric authentication or text message verification.
  • Beware of Scams: Exercise caution against scams targeting crypto holders. Avoid sharing private keys or seed phrases in response to unsolicited messages or emails.
  • Prioritise Privacy: Given your responsibility for asset security, opt for privacy-focused wallets.
  • Explore Smart Contract Protection Services: Consider utilising a smart contract protection service that offers features like wallet notifications, panic buttons, and backup wallets. 

By adhering to these recommendations and implementing additional security measures, you significantly diminish the risk of compromising the integrity of your self-custody wallet.

Embracing the Era of Self-Custody

The future unfolds with the embrace of self-custody, a paradigm where the blockchain ecosystem flourishes on your terms.

By leveraging a self-custodial wallet, you unlock a world of possibilities. Seamlessly connect your self-custody wallet to Web3 gaming apps, engage in the vibrant market of non-fungible tokens (NFTs), and swap cryptocurrencies like bitcoin (BTC) and ether (ETH) with significantly lower fees compared to centralised exchanges.

Direct access to your private keys propels you into the domain of decentralised finance (DeFi). With this, you can stake crypto to earn interest, lend crypto for yield, and even become your own market maker, collecting fees along the way.

January 9, 2024

The cryptocurrency sector is experiencing robust growth, driven by the increasing demand for a diverse range of crypto offerings. Innovative services like institutional staking protocols have gained substantial traction in recent times. 

Based on a recent survey conducted among Chief Financial Officers (CFOs) representing 100 global hedge funds, a notable trend is on the horizon. It is anticipated that by the year 2026, approximately 7.2% of their portfolios will be dedicated to cryptocurrencies, equating to an impressive sum of approximately $312 billion. While lending and borrowing strategies remain attractive, a substantial portion of these investments is expected to funnel into the practice of staking.

The data reinforces this projection, with Ethereum 2.0 staking alone predicted to exceed $40 billion by 2025. Intriguingly, institutional investors are actively exploring the potential of harnessing staking rewards to support startup ventures, underscoring the broader possibilities for capital allocation within the blockchain staking ecosystem.

This guide will take a deep dive into staking, its operational principles, and the participation of businesses such as blackrock crypto staking in this ever-evolving sector.

Key Takeaways

  • Institutional staking is committing and allocating a particular sum of crypto assets to the blockchain infrastructure and validating on-chain transactions.
  • Institutional staking refers to the active involvement of major institutions such as banks, hedge funds, and asset management firms. These organizations typically participate in staking on a large scale, exerting substantial influence on network dynamics and the allocation of rewards.
  • Institutional crypto staking presents an alternative opportunity for institutions to engage with cryptocurrency and web3.0 applications. It allows investors to earn rewards by acquiring and holding crypto assets.

What Is Staking?

Staking is an investment feature found in Proof-of-Stake (PoS) blockchains. In PoS, token holders commit their assets to ensure the network’s security in return for rewards. In PoS systems, a validator is selected by the protocol to add each block of transactions to the blockchain and is compensated with the native token for this validation.

The likelihood of a validator being chosen depends on factors like the quantity of tokens staked and the duration of their staking. Thus, staking offers token holders a chance to actively engage in the security of blockchain transactions and receive rewards for their participation.

Working of institutional staking

Staking is a feature available in select cryptocurrencies (such as Ethereum, Cardano, Solana, Polkadot) that operate on the Proof of Stake (PoS) model. Individuals and institutions can engage in institutional crypto staking independently or through cryptocurrency exchanges that provide this service.

Institutional crypto staking demands a certain level of expertise, as it necessitates the setup and operation of a network node. Validators are also required to maintain a deposit of supported coins within the network. These staked coins serve as a guarantee of the legitimacy of newly added blockchain transactions. Validators receive rewards, either in the form of fees or newly minted cryptocurrency coins, for successfully adding blocks to the blockchain.

If a cryptocurrency exchange offers staking programs, users can directly stake the crypto they own on that exchange. Some exchanges even allow investors to select their preferred validator. Notable exchanges offering institutional crypto staking services include Binance, Kraken, and Coinbase. 

In cases where cryptocurrency institutional staking programs are not available on an exchange, the cryptocurrency must be transferred to a cryptocurrency or blockchain wallet. Popular wallet options include Coinbase Wallet, Metamask, Liminal Wallet, or Trezor Wallet. 

While institutional staking can yield higher returns, it requires substantial investment and expertise. For long-term cryptocurrency investors seeking a passive income with minimal effort, opting for a staking service provided by a cryptocurrency exchange is a simpler alternative.

What Are the Pros and Cons of Staking?

Institutional crypto staking offers investors the potential for higher returns on their assets compared to traditional yields, such as interest from savings accounts. It is an environmentally friendly process as it does not require significant computational power. Additionally, institutional staking contributes to enhanced efficiency and security within the blockchain.

Despite these advantages, cryptocurrency institutional staking has its drawbacks. Cryptocurrencies can exhibit high volatility, and at times, the decline in cryptocurrency value can outweigh the rewards, resulting in losses for the investor. Institutional crypto staking may also involve a lock-in period, unlike publicly traded stocks and bonds. The level of liquidity, or the lack thereof, varies among crypto projects, and it is important to review the terms and conditions before making an investment.

How Institutional Staking Differs from Traditional Staking

Institutional staking distinguishes itself from the more familiar retail staking due to its unique characteristics and distinct requirements. While there are no fundamental differences on the blockchain itself, the specific needs and demands of institutional staking set it apart.

Unlike retail investors, institutional crypto staking involves the active participation of large organizations, such as banks, hedge funds, and asset management firms. These entities engage in staking on a much grander scale, which can exert significant influence over network dynamics and reward distribution.

Institutional stakers often rely on custodial services and maintain complex infrastructure to support staking activities across multiple blockchains. Furthermore, institutions must adhere to specific compliance regulations and implement robust risk management protocols, introducing an additional layer of complexity to their institutional crypto staking endeavors.

These factors collectively establish institutional staking as a distinct practice, shaped by the tailored needs and considerations of sizable organizations as they navigate the world of staking within the blockchain ecosystem.

What cryptocurrencies you can stake

As mentioned already, staking is only possible with cryptocurrencies linked to blockchains that use the proof-of-stake consensus mechanism.

The most notable cryptocurrencies you can stake include:

  • Ethereum (ETH).
  • Cardano (ADA).
  • Solana (SOL).
  • Avalanche (AVAX).
  • Polkadot (DOT).

What are the institutional crypto staking yields?

Institutional crypto staking yields vary from one token to another, with some tokens providing more substantial returns than others. Nevertheless, the nominal yield is just one aspect that staking participants take into account. The mechanism of rewarding token holders who engage in staking with native tokens inherently contributes to inflation (referring to the growth of the money supply). As a result, those who opt for institutional staking are less affected by the inflationary consequences of token minting.

Why Institutions Are Exploring Staking in the Current Macro Environment

Despite inherent risks, many institutions view staking as an integral component of their cryptocurrency investment strategy for several compelling reasons. Firstly, institutional crypto staking provides an opportunity for generating passive income from crypto-assets that might otherwise remain idle. Secondly, institutional staking rewards exhibit characteristics similar to compound interest, resembling traditional market scenarios where dividends are reinvested. These rewards are paid out in the same token being staked, allowing users to effectively ‘reinvest’ these tokens and potentially receive higher payouts in subsequent periods. This approach can also reduce the fees associated with token swaps, whether for stablecoins, fiat currency, or alternative tokens.

Another factor driving institutional interest in staking is that it doesn’t necessitate lending out assets as required by some other forms of cryptocurrency investments. In contrast, institutional crypto staking allows tokens to remain securely stored within respective wallets. 

Conclusion

Institutional crypto staking presents an attractive choice for investors seeking to generate returns on their long-term investments while remaining less concerned by short-term price fluctuations. 

Data indicates that the average staking reward rate among the top 261 staked assets exceeds an annual yield of 11%. However, it’s crucial to bear in mind that these rewards can fluctuate over time.

Moreover, the fees involved in staking can impact the overall reward percentages. Staking pools deduct fees from the rewards for their services, and this can vary significantly from one pool to another and from blockchain to blockchain.

To maximize rewards, selecting an institutional crypto staking pool with low commission fees and a commendable history of block validation is advisable. The latter not only enhances potential returns but also reduces the risk of the pool facing penalties or suspension from the validation process.

 

December 22, 2023