Coinbase, the bigshot cryptocurrency exchange & wallet recently announced its largest migration of $5 billion worth crypto from old storage (dubbed generation 3) to its cold storage infrastructure (generation 4). It was altogether a successful completion of the migration process. It is believed that it might be the largest crypto transfer in history.
According to news published, $5 billion worth cryptos included 5% of Bitcoins (BTC), 8% of Ethereum (ETH) and 25% of Litecoin (LTC) along with many other virtual currencies. Phillip Martin, Security Head at Coinbase said that it took several months to plan this successful migration since it was going to be a significant change within the company’s infrastructure. There were some potential risks to this huge migration. As explained by Coinbase, “One of the risks we identified early on in the process was the potential for our migration to be mistaken for an exchange breach or a large trader preparing to sell a significant amount of cryptocurrency.” It took huge efforts of many auditors and regulators to plan this structure. According to the firm, money will remain safe with this move which will positively impact Coinbase.
Initially, the business model of Coinbase focussed on Bitcoin, Ethereum, Litecoin and Bitcoin Cash notably. This was the only reason behind the pre-planned high-security upgrade. The exchange announced that it is going to further add four tokens such as AI, GNT, MKR, and ZIL.
The whole process involved a set of steps. It all began with a key generation process for assets’ keys. Then, a location was secured for the new computers and then printed out the keys. After that, key splitting took place for security reasons. Keys are then transformed into a well-protected & compatible format wherein they can be used in scannable QR codes. The team then applied Shamir’s Secret Sharing, a cryptographic technique, to protect the files and utilized an algorithm to protect the data. The money will get divided through many secure locations with various encrypted keys and then kept in cold storage. This will reduce the chances of the company getting hacked or having significant loss.
The All New Cold Storage Infrastructure
The new platform is capable of storing more than 98% of customer funds in cold storage, whereas the remaining money is kept online to facilitate everyday liquidity. It also serves “Vault” storage facility which enables the customer to put an automatic withdrawal lock time of 48 hours (2 days). In addition to this, Coinbase has also included FDIC program for the customer having funds in U.S. dollar wallet up to $250,000. The all-new storage system has a highly controlled and audited key generation process and advances with a transaction approval system and globally distributed key storage. This system prevents key loss, misuse of keys and also supports world-class key audit & governance while being currency agnostic. In other words, we can store any digital asset (cryptocurrency) using the same platform and not comprising with security provided to any single cryptocurrency.