A Dubai-based blockchain company called Nebbex has announced a new crypto custody solution. The platform will allow rapid crypto withdrawals from its secure vault. How will it balance liquidity with security, and who is the service targeted at?
About Crypto Custody
Custody services store crypto assets in a highly secure manner on behalf of institutions or large-scale investors. Coinbase Custody is one service of this type; BitGo is another. Regulations require investors with a certain amount of financial assets to store those assets with a qualified custodian. This has given rise to custody services that specialize in crypto security.
Custody often involves “cold storage,” meaning that coins and tokens are stored on a system that is not connected to the Internet. Sometimes the system is stored in a physical vault with additional security measures. This is the case with Nebbex; the company boasts a “state-of-the-art vault” that has been declared one of the most secure vaults in the world by Brink’s, a major security company.
These cold storage systems and vaults are never used in general transactions. The overall inaccessibility of cold storage prevents money from being stolen in a hack or theft. By contrast, “hot” wallets, online wallets, and centralized exchanges are extremely accessible and are frequently targeted by attackers.
Custody providers handle large amounts of cryptocurrency for exchanges and other high-profile clients, so they must ensure that stored assets are retrieved by the actual owner. This involves a lengthy verification process that can last hours or days before the cryptocurrency is taken out of cold storage.
Nebbex, however, will speed up this process: the service will allow clients to withdraw their funds in less than an hour. It will achieve this by representing crypto assets with its own redeemable tokens so that real cryptocurrency is not constantly put at risk during live transactions:
“Under the Nebbex™ system, exchanges operate redeemable tokens directly from their hot wallet, with alerts cross referenced with deposits they are redeemed in under 1 hour, mitigating the risks related to custodising client assets themselves.”
Who Is It For?
Nebbex’s custody service is targeted at exchanges, not at individual users. This means that individuals may indirectly benefit if Nebbex succeeds in improving the security of its various client exchanges. That said, hacked exchanges are often able to recover stolen funds as things currently stand, so users may not notice a difference.
Individuals who want to implement cold storage themselves will need to look at alternatives. You can create your own security solution by storing most of your crypto in a “cold wallet” — a wallet that is stored on offline media, typically in the form of a hardware wallet or paper wallet. Creating a cold wallet is a good practice if you hold substantial amounts of cryptocurrency.
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