Coinbase’s Vaults upgrade uses MPC to split private keys, enhancing security by preventing any single party from controlling the key.
Coinbase now manages $270B in assets, a $80B increase, reflecting its growing role in digital asset custody and security.
The Vaults technology aims to eliminate single points of failure, ensuring key shares are held in distinct environments.
Coinbase is estimating the use of its Vaults technology in further businesses—including, quite suitably, its institutional custody services—with a view to beefing it up. Coinbase cryptography lead Yehuda Lindell announced an update at the Science of Blockchain Conference on August 8 that aimed to improve security for both individual and institutional customers.
https://twitter.com/unusual_whales/status/1821588178614305024 Enhanced Security with Multiparty Computation (MPC)
Multiparty computation is used by vaults to secure cryptocurrency transactions. Rather than depending on a single private key, Vaults divides it into several shares and assigns these shares to various entities. Hence, no single party controls the entire key, enhancing security.
Vaults are designed to eliminate single points of failure. Each key share resides in a distinct environment. For example, one share is stored offline, another is managed by human approvers, and a third is kept on MPC servers.
Consequently, this separation ensures that attackers cannot easily gain full control of the assets. Lindell emphasizes that the goal is to ensure that keyholders never converge during the Vault’s lifecycle.
Coinbase's Growing Role in Digital Asset Custody
Coinbase’s Vaults will support various products, including custody and exchange services. This expansion reflects Coinbase’s growing role as a key custodian for digital assets. Notably, Coinbase holds crypto for nearly all issuers of spot crypto exchange-traded funds (ETFs), which have seen growth. In 2024, spot Bitcoin ETFs in the U.S. collectively manage over $55 billion in assets, as reported by Yahoo Finance.
Coinbase's custodial assets have also grown significantly. In its August 1 earnings call, the company stated that Coinbase currently oversees almost $270 billion in user assets.
Over the previous year, there has been a growth of $80 billion. Hence, Coinbase’s focus on enhancing security through Vaults is crucial given the high value and attractiveness of these assets to potential threats.
Coinbase’s Vaults upgrade represents a step towards fortifying the security of digital asset management. As the company continues to expand its product offerings, the implementation of MPC technology in Vaults underscores Coinbase’s commitment to protecting high-value assets from emerging threats.
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