There are several solutions for safe-keeping and custody of digital assets. The right solution depends on individual requirements, including frequency of trading, regulatory frameworks (if any), amount of assets, and so forth.
Piston Vault has many advantages compared to other solutions, and in most cases represents a better alternative that offers.
Piston Vault vs Self-Custody
Software wallets are implemented as mobile apps, desktop apps, or even as web apps. In all cases, they implement custody of blockchain private keys by encrypting using software, and storing them encrypted – somewhere.
This approach has the advantage of being simple to implement for the wallet provider, since software is fairly inexpensive to create and simple to maintain. It does however come with important shortcomings, which should be taken into account when evaluating this solution.
The main drawback of software wallets is that software is very forgiving compared to hardware. Whereas a microchip must be designed perfectly to ever function and be commercialized (since it cannot be replaced on-the-field), software is free from such restrictions (unless it is for missions critical application, such as avionics or medical). The consequence is that most software wallets are highly likely to have defects (bugs) that sooner or later will allow breaches by malicious actors.
Moreover, encryption done in software on end-user PCs is much less secure than hardware encryption and storage on a purpose-built secure hardware device. For example, malware could compromise the wallets.
Piston Vault Spark wallets use banking-grade secure enclave microchips to store private keys and are therefore free from this defect.
Hardware wallets are a great thing. Devices such as the Trezor or Ledger Nano offered cryptocurrency enthusiasts a great way to do self-custody of their private keys. They are simple to use and offer a very safe way to store keys. As with many retail solutions though, they are a viable alternative only until the assets under managements are small.
For large amounts of digital-assets, retail-grade hardware wallets have unacceptable shortcomings. The users themselves must find a place to store the actual device securely. This is not always obvious. A bank safe is secure but make access to the device cumbersome and expensive. Office or home storage does not represent a secure or professional option.
Even for normal consumers however, hardware wallets are often too difficult to use, since the average users must purchase, learn, and operate the device. This inevitably hinders mass adoption of blockchain technologies.
Spark wallets offer all the benefits of hardware wallets while delegating the safe storage and operation to Piston Vault, providing the user with institutional-grade security and protocols.
Piston Vault vs Institutional Custody
Hardware Security Modules (HSMs)
Hardware Security Modules, or HSMs, are professional-grade appliances designed for safe-keeping of certificates used for financial transactions. For example, to sign credit card transactions.
Although have industry certifications they were never designed for the blockchain, and present several shortcomings:
Any breach can expose all the keys stored within the HSM;
HSM patching can take down millions of keys;
An HSM is a single point of failure;
HSM systems requires 3 machines: Hot, Standby, Testing;
Since markets in digital assets do not offer a legal framework and traceability to recover stolen assets, by design they represent an unacceptable risk to custodial businesses.
Exchange custody means that digital assets, such as cryptocurrencies, are transferred to a wallet belonging to an exchange operator. This way, the user practically relinquishes all control of their assets and relies 100% on the security measures of the exchange.
It is widely accepted by the industry that this solution is the worst alternative. This has been has proven times and times again. Too many times malicious actors (hackers) have breached into the poorly designed security systems of crypto exchanges and gone away with the assets belonging to the exchange clients.
The advantages of this custodial solution, e.g. the assets being readily available for trading, are outweighed by the risks.
Exchange custody is no longer acceptable and it goes against what the role of an exchange should be – a provider of a market place designed for efficient matching of buyers and sellers, rather than the provider of secure infrastructures for the safe custody of cryptographic keys.
Piston Vault focuses solely on this latter business: safe-keeping of cryptographic keys.
We are redefining the meaning of digital asset custody
with purpose-built electronic safes for concurrent cold and host storage.
Spark Wallet Delivery
Piston Vault is more than a technology company. Through multiple layers of business services, we offer clients a wealth of services that address their requirement for digital asset custody, including institutional custodians, family offices, and fund managers.
Our services includes physical delivery of Spark wallets to any location for long-term storage in bank vaults. This facilitates storage and avoids transaction fees.