Coinbase Extends Vault into Its Crypto Custody Solutions

• Coinbase is increasing the security posture of its Crypto Custody solutions
• The company is expanding the use of its Vault technology with MPC
• MPC is to separate and distribute private keys, eliminating single points of failure
• Coinbase insists this is superior protection compared to hot and even cold wallets
• The company's security measures have allowed it to become a key digital asset custodian of $270B

Coinbase, a leading cryptocurrency exchange and custodian of digital assets, announced the expanded use of its proprietary Vault technology across a wider range of its products, including its growing institutional custody business. 

MPC at the Core of Coinbase's Vault Technology

Yehuda Lindell, head of cryptography at Coinbase, announced this on August 8 during the Science of Blockchain conference. 

The Vaults "are used and will be used for more products at Coinbase, for custody, exchange, and more."

Coinbase's Vaults use MPC to protect crypto assets, which works by splitting the private key used to sign transactions into multiple shares that are then distributed to different parties. This should ensure that no single organization has complete control over the private key and reduce the risk of a single point of failure.

This strategic expansion is part of Coinbase's broader effort to improve the security of its cryptocurrency storage solutions, especially as the company continues to serve a growing number of institutional clients.

Superior Security for Custodial Products

Coinbase's vaults offer a distinct advantage in eliminating a single point of failure, a constant security issue for many systems, and position themselves as an even more secure solution than cold wallets. 

According to Lindell, one key share is typically held offline, another is held by people, and the remaining shares are managed by MPC servers.

"There is one share for the offline environment, one share for human approvers, and one share for each MPC server."

This distributed approach ensures that key shares are held in different types of entities with strong separation between them, and the identity of key holders varies from product to product.

"Keys held in different types of entities with strong separation between them, so keyholders never go together throughout the entire life-cycle."

Lindella also clarified that customers often act as signatories for non-custodial products, giving them direct control over their assets. In contrast, for custodial products, key equities are managed entirely within Coinbase, "you would have MPC servers and human approvers all inside Coinbase."

Relating to Coinbase is necessary, as it's one of the key crypto players with approximately $270 billion in assets and has grown by $80 billion over the past year.

Conclusion

This careful attention to security at the system and approach level is crucial for Coinbase, providing specifics on exactly how they protect assets.

Rather than putting resources into marketing and convincing investors and traders how security-conscious Coinbase is, they aim to prove it by implementing concrete technologies that everyone can evaluate for themselves.

This is especially important in the context of Bitcoin and Ethereum ETFs, which accumulate huge numbers and whose loss could severely hurt the entire crypto industry.