Provable self-custody is essential for equipping institutions with true control and oversight over their digital assets.
Keys play a vital role in the world of digital assets, unlocking access to wallets that store digital assets. But how can one be absolutely sure of their ability to safeguard digital assets from security compromises? And how can one prove that they own these keys and the assets they point towards?
This is where the concept of “provable self-custody” comes into play. Levain is built on the foundation of this concept, making us the first and only self-custody wallet that empowers institutions to prove that they have sole access to and ownership over their keys and assets.
As no third party - including Levain - has access to your institution’s assets, no one can seize or move them without your approval. In essence, institutions become their own custodians, overseeing the security of their assets without deferring to any external organizations.
This is especially important given that third-party custody has proven unreliable and even incurred massive losses for many individuals and institutions. Take 2022’s FTX incident as an example. When this massive centralized cryptocurrency exchange went down, at least USD 8 billion worth of investor funds went missing - a considerable proportion of these funds belonged to institutions.
This article therefore provides institutions with insights into how provable self-custody protects their digital assets and how Levain enables this functionality with its multi-signature wallet solution.
What is self-custody, and why does it have to be provable?
Before delving into how Levain’s solution enables provable self-custody, it is first imperative to understand what it is and how it works. To begin, let’s consider the typical life cycle of the digital asset custody process:
- Private key materials that will hold the digital assets are first generated.
- The encrypted private key material is then stored.
- The multi-signature wallet is created on-chain to store private key materials.
- Users are now able to transact with digital assets.
During the transaction process, the transaction is first initiated on-chain, which prompts each key to apply a signature. Each signature signifies its respective owner’s approval of the transaction. Once the requisite number of signatures is gathered, the transaction is executed.
This life cycle applies to both self-custody and third-party custody. On a high level, however, these custody types differ in terms of who has control over keys and digital assets. Third-party custody, for one, sees institutions deferring the management of all their keys and assets to an external custodian.
This differs from self-custody, where institutions maintain absolute control over their assets. No third party is involved at any stage of the custody life cycle except the self-custody technology provider, who only provides the infrastructure without interfering with the custody life cycle above. In a typical 2-of-3 multi-signature quorum, institutions own all three keys to generate signatures for transaction approvals.
The provability factor takes self-custody to the next level, introducing a powerful layer of transparency to the equation. With a provable model, institutions gain significant oversight over their keys and assets, enabling them to verify and audit the entire custody process publicly. In turn, institutions can personally ensure that the custody of their assets is handled securely and correctly.
Learn about the design models of cryptocurrency wallets and how multi-signature works to provide unparalleled security for your institution’s digital assets.
How Levain empowers institutions with provable self-custody
Provable self-custody is the most secure and reliable way institutions manage and protect their digital assets. Levain’s self-custody solution is built following this model, adhering to four crucial principles as follows:
1. Secure random
As random number generation is a core aspect of wallet management and key generation, Levain thus deploys only the highest standards available in the market today. To this end, keys are completely generated on the institution's browser – never on Levain's servers – using cryptographically secure pseudorandom number generation (CSPRNG).
The CSPRNG method is rigorously battle-tested to ensure that keys are cryptographically secure from bad actors. This is broadly achieved through two key trials:
- Statistical randomness tests
- The ability to withstand malicious attacks, even when any part of their initial or running state is exposed
Furthermore, the institution's generated keys are never transmitted to Levain's servers, ensuring that no third party can externally manipulate them - Levain included.
2. Transparent transactions
Transparency is a core pillar of Levain’s solution, and that is why all transactions, approvals by individual key holders, and other key processes are publicly verifiable on-chain. They can also be verified on blockchain explorers such as PolygonScan and EtherScan.
As data on the blockchain is immutable, all information is indelibly recorded and made public. It is, therefore, impossible to secretly transfer assets out of a wallet, as anyone can easily trace the transaction.
3. Complete decentralization
True decentralization is another key feature of Levain’s solution. Built such that a single point of failure does not control it, Levain cedes complete authority and control to the institution. Under no circumstances will we have any knowledge of the institution’s private key material, nor will we be able to manipulate their assets.
This is made possible during the wallet creation process. During this process, institutions are given keycards on which numerical values are inscribed. These values are fundamental for recovering private keys, which institutions can perform independently without Levain.
For further peace of mind, institutions can prove that Levain does not know their keycards. When creating a new wallet, all they have to do is examine the outgoing single network request. This request will always reveal that the institution’s private key will never leave its host device as Levain only sends over the encrypted version - the raw version is always left untouched.
4. Simple proof
Simplicity and intuitiveness go hand in hand to create a digital asset management system that is easy to understand and verify. In turn, institutions benefit from true autonomy over their keys and assets, as they manage their digital assets with razor-sharp accuracy that leaves no room for error.
This is made possible by Levain's use of the highest form of on-chain security – multi-signature – in conjunction with Elliptic Curve Digital Signature Algorithm (ECDSA) signatures to execute transactions.
Guarantee the security of your institution’s digital assets with provability
For any institution, its top priority is to safeguard its assets. While establishing self-custody infrastructure is crucial, it is just as important for institutions to ensure that they can consistently verify their ownership and control over their assets.
Levain provides institutions with this critical functionality, empowering them to independently monitor the on-chain signing process and confirm the stakeholders' identities. This is made possible via the concept of provability. It is, therefore, essential for any discerning institution to reinforce the security of its assets with a provable self-custody wallet like Levain.
Find out how Levain empowers your institution with provable self-custody. Talk to us here.
