Crypto exchange CoinDCX on October 30 launched an integrated decentralised custody feature for its platform, wherein its 15 million users would have the option of having ownership of their crypto asset holdings in their own wallets.
This comes months after rival WazirX lost over $230 million in a cyberattack in one of their multisig wallets, erasing nearly 45 percent of its crypto asset holdings. The multisig wallet that required more than two private keys to unlock also involved a third party custodian, Liminal, for better security and wallet infrastructure. Users didn’t have complete custody of their holdings and it was with the exchange at that point.
With this new feature that CoinDCX claims to be industry-first, users will get to move their holdings from CoinDCX’s custody to a decentralised wallet that they can control, meaning their assets will be stored directly on the blockchain.
Sumit Gupta, Co-Founder, CoinDCX told Moneycontrol that the users would have full control of the private key of the decentralised wallet that will be encrypted using user's email id authentication. Thus, no movement of assets or transactions from this wallet would take place without the user’s consent and unlocking of the key.
According to CoinDCX, this decentralised custody and wallet feature “provides a more streamlined alternative to traditional self-custody wallets, which often require users to manage complex seed phrases and private keys”.
A seed phrase is a back-up seed recovery phrase that uses a sequence of random words to store the data required to access crypto on blockchains or crypto wallets.
To be sure, if a user transfer funds from CoinDCX custody to their custody, those funds won’t reflect on CoinDCX’s Proof of Reserves (POR). It will show on users personal on-chain POR.
The decentralised custody feature is built on top of the exchange’s in-house Okto ecosystem of blockchain and Web3 wallet, which was launched earlier this year.
Gupta said, “There are lakhs of nodes distributed on the Internet which gives security to a blockchain. Similarly, your funds are diversified across different data centers, and one node of that will be in your phone, in your local device for key permission. Nobody can steal, nobody can even do any transaction on those assets.”
“It's a first of its kind globally. The team has done a remarkable job of balancing security, and compliance. After the recent security incident that happened, a lot of customers were obviously concerned about the safety of the funds and that got us thinking,” he added.
The exchange has simplified wallet operating process for the not-so-savvy end users by eliminating complexities like seed phrases and replacing it with advanced security layers such as two-factor authentication (2FA) and multi-party computation (MPC).
Following the WazirX hack, in August, CoinDCX had also set up a Rs 50-crore Cypto Investor Protection Fund (CIPF) to provide cushion to the customers in case of any unprecedented cyberattack on its platform.
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