A novelty in cryptocurrency custody technology will bring banks closer to digital assets

A novelty in cryptocurrency custody technology will bring banks closer to digital assets - Shard X crypto 1024x536Shard X, a company specializing in stealth-mode cryptocurrency custody, has claimed to be the first company to successfully run a multi-party computation (MPC) algorithm on hardware security modules (HSM).

The importance of the MPC

In summary, HSMs are a proven technique for storing private keys that is particularly popular in consumer products such as Ledger and Trezor. The MPC, which splits cryptographic keys into fragments and distributes them, is becoming increasingly popular with custody technology providers such as Fireblock and Curv.

But the MPC faced the challenge of where to store the key fragments: the whole process was thought to be too computationally heavy to run on hardware.

Solving this problem is important because banks, which are gradually moving closer to custody of cryptocurrencies, generally like and trust HSMs. So a combination of field-proven bank-grade HSMs, combined with a state-of-the-art MPC is likely the kind of technology these institutions will be looking for, says Yaniv Neu-Ner, co-founder and CEO of Shard X.

More secure management of private keys

Shard X has successfully performed MPC tests with Entrust, an nShield HSM supplier to major custodians, Neu-Ner said, and is now working on managing MPC with a number of companies offering HSM, such as Utimaco.

“Our big step forward is that we have been able to compress and optimize the MPC code so that it can run on bank-grade HSMs, something people in this space never thought was possible,” said Neu-Ner.

Wallet vendors, custodians, and exchanges all need bank-grade security for crypto-wallets and to protect and manage multi-million dollar assets across multiple blockchains, said John Grimm, VP Strategy and Business Development at Entrust.

"ShardX has implemented MPC technology on Entrust nShield HSMs to ensure the integrity and secure processing of the private key fragments that protect the blockchain," Grimm said.

Why is the MPC solution only now?

Neu-Ner said the credit goes to his team, who managed to combine a very strong background in both mathematics and engineering, most notably his CTO Nikita Lesnikov. "Lesnikov is an exceptional mind," said Neu-Ner.

“He was the one who figured it out. I imagine that now that we are announcing this, the competitors will start working on the same challenge and I think they will get there. But it's a big step forward to be the first. " As for how this breakthrough was peer reviewed, Trail of Bits, MPC Code Auditor, was selected to monitor the work continuously.

"As this industry grows, there will be more and more money at stake, and right now we are seeing exchange hacking quite regularly," he said. “So I don't think one technology will be enough. The future I imagine is made up of multiple technologies coming together to create safer storage solutions ”.