Copper Unlimited: Or, how and why we’re destroying private keys [updated]

Securing a new digital asset class in a manner that meets the custody requirements of institutional investors has been a challenge for the crypto-community since its inception. We heard the call, this is our answer:

Copper Team

The question of who controls your private key has been central to determining risk for digital asset storage over the last 5 years.  Any comparison site looking at hot or cold wallets will focus almost entirely on whether it’s the user or the custody supplier who is responsible for the keys.  Why all the attention?

The perils of private keys

The public address of your wallet merely points to where the assets are recorded on the digital asset’s blockchain. It’s open-source, verifiable by the entire network, and transparent (to the extent all transactions registered against that wallet will be listed in plain site for any scrutiny). But to access the wallet, you need the private key. A string of characters that will grant access to move assets from the wallet to anywhere on the blockchain, irreversibly. So it’s understandable that if you have a large quantity of digital assets you will want to control the private key which unlocks them.

But therein lies the problem. Namely and famously, if you forget your private key and didn’t store the seed in a safe place ( ie. cold/offline storage), you are completely without recourse. Nothing short of divine intervention is going to gain entry into that wallet. Your funds will forever remain right in front of you, tauntingly inaccessible.

So how do you safely facilitate crypto custody?

At Copper, we are always on the lookout for cutting-edge innovations to enhance our security and improve our clients’ experience.

Copper has developed a proprietary system that uses key shards to verify and authorise transactions generated from a Copper Platform account. This is underpinned by ultra-secure multi-party computation (MPC) technology, which is the highest level of security in key management encryption.

MPC leverages secure algorithms to sign blockchain transactions without ever referring to whole keys. Special private key shards are formed simultaneously and in isolation. Like polynomial sharding, they are then encrypted and distributed to different parties. Using a system called Zero-Knowledge Proof, key shards can communicate secret information without the risk of revealing the actual information.

Here’s how it works:

Using MPC, Copper securely generates the first key shard. Co-located with Copper, or remotely, two further shards are generated for you and your independent trusted third party – usually a fund administrator or a law firm.

Copper Unlimited creates an infrastructure where the key shards are password encrypted and crucially, never exist on any one machine, server or device.

Any account on the Copper Platform can be set up with a Vault. This is where you leave the digital assets you don’t want to trade with in any of the multiple trading accounts you or your team may be operating on the Platform.

In order to withdraw digital assets from the Vault to an external location on the blockchain (ie not one of your trading accounts in the Copper Platform) you will need to authorise the transaction using Copper Unlimited, our standalone secure custody application.

There is no additional cost to this. There are just some additional steps to take which secure your account better than any other provider on the market. It gives us peace of mind to know your digital assets are secure, even if it means taking a few moments longer to process withdrawals (please note this doesn’t impact trading on the Copper Platform).

The Copper Unlimited application is divided into two functions: wallet creation and transaction authorisations.

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The first time a user interacts with the application, they will receive an activation code and download link from their account in the Copper Platform. From there:

  1. Your Copper account manager will lead a wallet creation session for each of the assets you will store in the vault. This will require participation from you, and your trusted third party. Each wallet will take about 5-10min to create.
  2. Participants can connect remotely, or using a LAN if co-located with Copper. The process is safe to conduct over a server because of Zero-Knowlege Proof cryptography.
  3. Once each party has connected, the Copper Unlimited application will set about some very secret and very complicated maths to derive a key-shard for each participant. Because a private key never existed in the first place, the process is more secure than polynomial sharding, or any other method of key management.
  4. Now that the wallet has been created, each party is required to save a back up key-shard. These are encrypted files which Copper recommends are stored in a physical safety deposit box. If you do not have one, we can recommend suppliers in London.

If the user already has a wallet set up, or if they are already a designated key shard holder and have just received a withdrawal notification, then the process for transaction authorisations is as follows:

  1. On the application home screen, the user selects the second option for Co-signing.
  2. The user will then be prompted to upload their key shard and enter the password.
  3. The Copper Unlimited application will show the transaction details and ask for them to be verified as correct. Once the key shard holder is satisfied that the details are correct, they will click the confirmation button.
  4. Once the Copper Unlimited application has received transaction authorisations from two out of three key shard holders, it will broadcast the transaction to the blockchain.

Why is this better, it sounds harder?

The Copper Unlimited application provides the highest level of protection and accountability.

Using MPC derived key shards means that even if you lose yours, having nominated two key shard holders (your solicitor and Copper, for example), a transaction can still be authorised. This would enable you to set up a new wallet, transfer all assets out of the old one into the new one, and this time be a little more careful with the password, should it have slipped your mind the first time.

For more information on how your organisation can benefit from Copper Unlimited, please send an enquiry to our sales team.

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