The Importance of Chain of Custody
In the world of finance, the use of chains of custody for assets is established practice. At the core of any financial entity, fund, bank, trust fund, etc. Very strict rules on how assets can be transacted can be found. These are there to make sure assets under management are properly handled and no accidental losses can happen.
The world of crypto asset management is a little behind. In it, people are not the primary controllers of assets, private keys are. Most asset management firms and individuals had to first learn to secure a private key and then set up a chain of custody.
This has led to many errors being made in the crypto world. Mistakes have resulted in sending funds to the wrong people, or even to losses. But the crypto world is always improving, and in this article, we’ll see why Unido is the solution.
The 10.5 million dollar mistake
Crypto.com on December of 2021, accidentally sent 10.5 million Australian dollars to a woman in that country. Originally, the company was supposed to process a 100 dollars refund and failed to notice the error for seven months. The mistake resulted in a big legal problem.
The person in question purchased real estate with the money. Crypto.com had to request the Australian legal system to freeze her assets and force the person to sell the property and repay the company. The resulting legal action only added difficulties for the crypto company.
The oversight was only discovered after the company did its annual audit. There the accounting error was identified and Crypto.com quickly moved to recover the money. The whole incident went public once the court’s documents were made public.
Crypto chain of custody
Normally, one private key is the one controlling the assets of a crypto wallet. Anyone who has access to that private key can move these assets, including attackers. For this reason, at the beginning, most crypto users focused on securing the private key as much as possible.
This created a problem for the asset chain of custody, as for security reasons only one person should control a private key. But a proper chain of custody requires several people reviewing a transaction if that operation represents a considerable amount of the assets under management.
Yet, crypto businesses, small funds, and individuals did their best to keep the private key under the control of one person. The apparent competing logic of a chain of custody and securing the private key was solved by the introduction of multi-signature wallets (multi-sig wallets).
These special wallets require that each transaction be authorized by more than one party, each with a different private key. By deploying this technology, proper chains of custody can be set up for crypto assets and security is increased.
It seems that multi-sig wallets brought crypto custody to the level of traditional assets, but that’s not the case. Multi-sig wallets are actually more secure and offer better custody than traditional systems. In legacy finance, accounts are managed via external systems like legal agreements, signatures, bank transfers, etc. there is a separation between control and custody.
In crypto, both are the same and are executed under the same system, the distributed ledger. The different private keys approving a transaction are executed on top of the blockchain and recorded in an indelible record forever. Anyone can review who approves that transaction and audit the result. Crypto custody is superior to the legacy system.
Unido EP is such a custody solution. In the Unido wallet, organizations and individuals can easily create multiple private keys that are necessary to approve transactions. These give much more control to the people in charge of the chain of custody, and by securing proper asset management, crypto users can rest easy knowing they’ll never send millions of dollars to a person across the globe.
Unido Boiler Plate
Unido EP is an out of the box complete crypto custody solution. Our platform allows individuals and businesses of all sizes the ability to easily customize controls over their crypto assets. By using our interface, anyone can create a crypto wallet, share control to several users, and set a minimum set of approvals for each transaction.
Unido EP comes with a web-based dashboard and a decentralized application (dApp). Our platform is poised to create a new standard on crypto asset security delivered to the hands of every type of crypto user. Join us now in our journey to transform crypto asset management.