January 3rd, 2022, marked the 13th anniversary of the arrival of Bitcoin and the birth of the cryptocurrency boom and it’s clear that the advance of digitisation has now moved into the mainstream.
The worldwide level of digital asset management, recently accelerated by pandemic lockdowns, easy to use investing apps and cloud based storage is now expected to reach $10220 Million by 2026. That’s up from $3157.5 Million in 2019, at a compound annual growth rate of 18.3%. This presents new challenges for financial institutions tasked with storing and securing their client’s assets.
Given the growth in the capabilities and reach of malicious hackers, it is an uncomfortable truth that a large quantity of digital assets go missing and is often impossible to trace or recover. The Financial Times recently reported on data compiled by industry intelligence site Crypto Head that over the past 10 years, there have been 126 big breaches, totalling $3.1bn with the average breach costing about $25m.
So what ways are there to store and protect these digital holdings and the keys that unlock them? When it comes to cryptocurrencies, the emphasis has been on digital wallets and the safer physical USB drive but both have vulnerabilities.
Digital wallets can obviously be hacked whilst USBs can degrade or fail and if passwords are lost or forgotten, all holdings are locked out permanently. Individuals have gone to extreme measures to record their keys—keeping them in safe deposit boxes or as encryptions in graphic files. Some users have even gotten tattoos with their key information!
Digital exchanges offer an alternative solution either using fiat or alternative currencies, and whilst some of these have secured insurance, experts have voiced concerns about their security and stability. Simply put, as a larger target for thieves an exchange may attract bigger hacks putting assets stored there at higher risk. Also, the same would apply should an exchange cease to exist as evidenced by the 2014 collapse of Mt.Gox - then the world’s biggest cryptocurrency exchange.
It is clear that to meet the needs of the digitised asset age, innovative solutions in storage infrastructure are required to beat the hackers. ‘Defence in depth’ is an ethos where world class, bricks and mortar storage with military-grade security, alongside advanced cryptographic key management techniques, and new patented technologies, combine to deliver the practical solutions that the banking and finance sector will need to deliver the levels of confidence and peace of mind their clients expect.