How Casa Makes It Harder for Someone to Steal Your Bitcoins - Ep.106

Transcript

hi everyone I have really exciting news for you today in case you haven't heard already I'm doing a live podcast recording yep that means on a stage in front of an audience perhaps in front of you and my guest will be vitalic buan the creator of ethereum we'll be discussing scaling governance competition in the smart contract space and more and you'll have an opportunity to ask questions it'll be in New York City the evening of March 20th the doors open at 6:00 the show starts at 7:00 and we will be announcing the venue soon get your tickets now there's a link to the events page in the show notes of

this podcast episode or you can just search Eventbrite for Unchained or vitalic and the event will show up you can even find it on Facebook again it's March 20th at 600 p.m. in New York City buy your tickets now the link to purchase is in the show notes of your podcast player I look forward to seeing you there hi everyone welcome to Unchained your no hype resource for all things crypto I'm your host Laura Shin if you've been enjoying Unchained pop in the iTunes to give us a top rating or review that helps other listeners find the show and if you're not yet signed up to my Weekly Newsletter go to unchain

podcast.com and sign up right now considering using digital Securities as a way to grow in 2019 tokens off's trusted platform provides the security and compliance tools to leverage blockchain technology and enter new markets with confidence visit us at tokensoft doio or on Twitter at token soft Inc do you have an idea for a blockchain app but are worried about the time and cost it will take to develop the folks at Azure have you covered the new Azure blockchain devkit is a free download that gives you the tools needed to get your first app running in less than 30 minutes learn more at aka. ms/ Unchained or by following them on

Twitter at msft blockchain within months cryptocurrency anti-money laundering regulations Go Global are you ready avoid stiff penalties or blacklisting by deploying effective anti-money laundering tools for exchanges and crypto businesses the same tools used by Regulators Cipher Trace is securing the crypto economy my guest today is Jeremy Welch founder and CEO of Casa welcome Jeremy thanks for having me Laura let's start with the basics what is Casa and what products and services does it offer sure Casa we describe it a couple different ways but current one is Casa is the best personal key system on the planet um that's a somewhat technical

description and you know we view that we're headed towards this world where a lot of wealth and data is going to be managed and controlled by private Keys public and private keys by cryptography and so what our system does is enables you to manage those keys easily and then we're building easier ways to manage all of this new data uh that starts with Bitcoin and that starts with other cryptocurrencies but we will get to other things um a less technical description would be uh that we are kind of we're building a kind of sovereignty as a service we are trying to build uh more independent systems and if you want to live a life that is more independent of some of the big dat companies uh that gives you more control of your data of your wealth then uh we will give you

flat fee options on how to do that and let's talk about just high level overview your main products what are those sure so the direct product that we have today we have the casa node which runs Bitcoin and lightning and we have Key Master which is the uh key management application the key management application today is uh running three of five multisig primarily so it is a it's a 10 a year service and software package and we help our users manage a multi6 scheme that's three of five um there are five total Keys you have to have three of those keys in order to make a transaction and the user controls the majority or the client controls the majority of those keys so the client

controls a total of four we use Casa hold one key and that key is used as a emergency recovery then we assist the client if they ever have an issue if they ever have a technical issue or they've lost a key um we can assist them and getting their key uh key set back up to speed but again this is this is targeted at these what we call Premium hodlers people that have a lot of cryptocurrency $500,000 or a million dollars plus um and they want an easy way to manage that themselves instead of storing it on an exchange or outside provider um they want to self custody at the casa node itself is a Bitcoin and lightning node and that enables you to route and send payments yourself based on your local device all right so before

we dive into the details on those products let's fill in your backstory how did you come to found Casa I founded Casa uh this company goes back actually a couple years I've been building companies for over a decade um I actually dropped out of Duke for a little while and I joined these guys at invite media uh we built uh the first demand side platform this was in the advertising technology space and um we sold that company into Google in about 2010 and so I get a really good view of what the entire internet at the time and kind of up to now has been based off off of which has largely been advertising uh technology and advertising systems so you know did that company we sold that

in I spent a year at Google learned as much as I could I went back to Duke um where I studied uh political philosophy before dropping out and uh went back to finish up and when I went back to finish up I had all these questions I was in New York uh with that company and with Google around the time of the financial crisis so I had all these big questions as to how the global Capital system worked and I went back to school and started digging into these questions and that's around the time that I found Bitcoin so uh the kind of first public thing I did a lot of private study and then first public thing I did was we did a Duke Bitcoin conference there Matt Caro who is a Bitcoin core contributor um a few other people that are now in

the ecosystem we were all at Duke and we wanted to do something to get more people at Duke into that uh but that was the kind of first public thing and then fast forward a few years later um when I was building another company um this company started getting pulled and shifted more and more towards um this ecosystem and it really became Kasa so we actually started funnily enough as a home sharing app and I've been in the ecosystem for a long time I knew the space I was technical um and I uh the shift towards this broader kind of sovereignty as a service or more of a platform company instead of an application company happened because we we tried to build an application first so we were trying to build a um an an Airbnb competitor actually with the

blockstack team so we were going to build on block Stacks systems and um during that process of building a an application in the space uh we we didn't Ico we were never going to Ico there were you know we evaluated a lot of ways to do this but we quickly found that some of the kind of core or I would say fundamental Technologies around personal key management around personal node management there were major problems there and by solving some of those problems we can enable not just our our El to do well with an application but many other teams and companies and so our our long-term Vision has always been about um you know started as trying to build a decentralized application and to counter some of these older systems that we'd seen in the adtech ecosystem we went below that and started building uh

you know foundational technology and then now we we're starting to to give a much bigger Vision with the node and the key management in one and 2019 will be a lot you know for us will be about a lot of um building a coherent experience not just for ourselves not just for our direct clients but for other developers other partners um to be able to reach these customers and many others and simplifying their lives if they want to build more in this ecosystem yeah I am a fan of Tim Ferris is and he talks about how one model of Entrepreneurship is to what he call scratch your own itch and in your case I feel like that is what happened like you were trying to build at the application layer and then realized oh just some of the really basic things around how to manage

private keys are not easy to do and so that's kind of like a a more foundational problem that needs to be solved and I actually this is something I've been commenting on recently in episodes but one thing that's always puzzled me a little bit about some of the hardware devices is that they ask you to safely store your private your your seed phrase your seed yeah your seed phrase and I'm just like oh my gosh where where would I store this without because like I'm the kind of person where if you ask me to kind of organize documents or something then I will if I kind of file them away I will never know ever again where I put them like I just

will not remember how I organiz like I I will not and so I I just wondered if you could just sort of describe what you think are all the problems with how an individual might try to safely store their seed frases yeah I mean you hit the you really hit the nail on the head um we we talk a lot about how beneath that that single statement of you know keep your seed phrase safe uh is an entire discipline right there's an entire company there's an entire you know you have to be an expert just to do that and the brilliant thing you know Elena who joined the team um she was the CEO and and founder of treasure um one of the first Harbor wallets and they

tackled the real problems that they were addressing and tackling around Key Management were actually against online threats you didn't want to keep Keys directly on your computer or any kind of hot connected device and they succeeded in that they succeeded in in in solving that kind of core set of problems but along the way with the design of being a of having some form of backup they opened a new set of problems and we are addressing this kind of new set of problems and the kind of broader ecosystem and one we one way we do that with a multisig is we have what's what's called a seedless setup where we don't know the seed phrases uh We've we've built we've intentionally built the system so that we don't know the seed

phrases whenever we're setting up your keys and uh you know you don't know the seed phrases you don't record them you don't write them down you generate all the keys and then we've made it really really easy to swap in new devices so what happens is if you know you lose a device or a device becomes compromised um you're attacked and a device is stolen then you just swap out a new device um into the key set and we made that really easy it's seamless it's you know two or three Taps happens in a few minutes uh and you know no command line no copy pasting just very fast and by making that easy uh and then wrapping a support service around it again we're trying to address this kind of uh this entire discipline that you have to learn

um we do view this whole process it is going to be a journey for most people anybody that's used the treasure it's incredibly empowering uh the first time they try it and they're you know they whenever the funds actually land on the device and they're walking around like wow I mean you know I really I could cross borders with this I can go anywhere with this if and then the the scarier thing is if I lose this right then it's just gone and there are these so there are these kind of like scary things around it but it's also incredibly empowering it's like you know I I don't know if you if you think back to like the first time you drove a car as a teenager uh today we we totally take it for granted but the first time you get behind the wheel and you're

driving this big car and you can go fast and it it is it's a rush right um and it's really empowering and you know and I think we're going to see similar things around this technology is as it gets easier and easier and I describe cars a lot because if you think about what goes on behind a car the the push button nature of just a Toyota Camry uh you just push the button and it starts and you just hit the gas and it goes but behind that there's an incredibly complex engine you know tens of uh around it's over 10,000 Parts um and a standard automotive engine and it just works and so I think that where we need to get to is even though we have these components like a treaser like a ledger and we have we have these current

experiences to where it's like wait okay this one component even though it's supposed to be simplified this actually is creating more complexity over time we will get it to a push button just swap in Keys you know um you know if you lose one you can just go buy one at a Best Buy or some other store I mean we want to get to this world where it's just common nature to have lots of these key devices around um and just much easier to use yeah that would be comforting to someone like me because I am known for losing things constantly and it's super annoying for me even though it's my family who's always complaining about it I'm like why do you guys care it's me that like one who who's affected by this but anyway um so I actually just want to unpack this multi- solution you kind of

briefly described it but from a diagram I saw on your site so as you mentioned before you guys keep one key that's kind of like an emergency backup and then the other four are accessible to the user themselves so um there's one on their phone app one that they would keep at home one that maybe they put in a bank and one that maybe they keep at work but how so so like for instance in my case where I don't have you know another place where I work where would you recommend that I put that fourth key sure so this changes uh each person is different um some people store them they have you know some remote properties some people

use a series of Bank vaults um everything has trade-offs and we advise clients on what the mix of those trade-offs are some people they have a you know a brother or a sister or a you know some some sort of sibling that they'll end up storing it with that they trust and that they're very close to and that they you know they maybe co-own some other properties or something with and they do some already they do some kind of kind of com combined Financial work with um sometimes it's a another business partner right like so it's it's not it's not always just different locations sometimes it's different people the important thing about it is is you know multi signature uh multilocation multi- device so even spreading out across different types of devices actually protects you from what's called a supply chain Tech um to

where someone could gain access to one of these company Supply chains and potentially you know um or cause problems with a single device provider um but you know the answer again kind of jumping back to that is that it really depends on the client uh we do have these kind of core principles around how we approach uh clients and and the first one is Sovereign customers first and what's important about that statement is is that the the decisions every client will be unique and in a in a kind of age of a lot of companies that uh in the kind of Silicon Valley Way of just like scale rapidly and treat everyone the exact same we are distinctly trying to go against that and treat every customer as unique as possible and think about really tailoring uh our security

recommendations to kind of each user's life because everybody's different and and they're all going to have kind of different security situations so you may have a very different security situation and and um and the location where you'll put it but we you know we'll find something for anyone and then but how could you be certain that some individual users are not implementing it in a way that would leave them vulnerable because if yeah that's that's a it's a great question I mean we can't and that's part of the point of building like this and part of the point I think of going down this road of Bitcoin generally is about personal responsibility and we've again we've I think we've been through an age to where things were easier and everybody was

treated the exact same and we oversimplified things in a sense um where now there's a lot more responsibility there's a lot the consequences are a lot heavier and we make it very clear to our clients that if you lose three of those keys that you have three of the four then your funds are gone the funny thing is that is that you know as we describe that you know that that feels terrifying whenever you're seeing it on the screen and we've made it really easy to visualize and you know if one key goes down then we have a the entire kind of Shield uh drops and then the the the one key that you've lost goes completely red and it's it's this very visceral visual experience by Design right but the funny thing is that is we think about you know if you if you

have a total of three or five right and you uh lose one key and then you lose a second key then you're at the absolute Edge if you lose another key then you're it's done right you've lost all your funds I would probably end up in that situation well the funny thing though about that is that that's actually the normal state of everybody that just has a treasure or a ledger the normal state of everyone that just has a single device is this case to where if they lose that device or they lose that seed phrase it's gone and so we've built layers above that and and to simplify that and the Chan is that you you know the Chan is that there's a natural disaster that affects you know your city and the other city that you have one and one of our uh customer support centers

and so you didn't have access to your keys is much much much lower than if you just you know your house was just in a fire and then your treasure and a seed phrase got destroyed right so it's and you we're by by Distributing risk across again multi multi signature multi- device multilocation we are minimizing it as much as possible but there's still you can never take away the personal respons responsibility element of that and I we we've seen it as an empowering thing we've seen people respond and excited about the fact but it's definitely daunting it's not for everyone yeah well since you brought up fire I actually did have a question about natural disaster type of scenario because as we know recently there was a

fire that did wipe out a whole city and there are times of course when we've got things like hurricanes and other sorts of natural disasters tsunamis that kind of thing so in those situations where maybe I even have spread my different keys out to different locations but potentially I could end up in a situation where three or more of my keys have been lost then then what are just are the funds just gone yes the funds are gone and the the that is why again in terms of spreading these out and multi Multi-Device multilocation it's really important that you're spreading them across multiple locations most of our clients do it across multiple cities they will frequently leave the devices

in you know in fireproof safe in any one of the locations that they're in you know we've heard of we we we don't know the exact locations of devices that is up to the in client um but we've we've heard of Bank vaults we've heard of you know personal fireproof safes we've heard of a variety of things and this is this Echoes and this is similar to how people normally store their devices but we've also seen cases we we're kind of hyper sensitive to this and so we're constantly reminding clients to check their devices and we do regular you know kind of even when they're in Cold Storage we do regular quarterly checks and just making sure so there's there's one problem that a lot of people aren't even thinking about right now which is bit rot so if you take just an iPhone and the error rate on an iPhone um is

such that Apple assumes that uh maybe it's 1% or 0.05% of iPhones that they manufacture are going to fail within a year or within half a year just because of the you know error rates and Manufacturing process that becomes a lot more terrifying if it means that you're kind of managing personal funds and you have devices and key devices that tie into your personal data and so you know we we are even just checking we have we have um automated checks inside the system to where you can do these health checks of your devices regularly but yeah it is it brings a lot more I would say it brings a much more kind of visceral tangible knowledge of or or awareness of system whenever you're using this now

the reality is that the real world isn't actually that much different I think what's happening is that you know by Design we're bringing this kind of to the Forefront and making it really easy to understand what the real risks are and what the real situation is and but the reality is that it's not you know the world's not that much different it's you know more car analogies if you're ever in a car accident for a while after being in a car accident most people are are jittery they're very like they're they're careful and they're looking around and they're realizing again like how fast cars are going but then we get in these flows of just being you know being used to being in a car and no car accidents are happening and our minds just kind of turn off to the real risks where again we just see it as these are

the risks that are around us always it's just we don't think of it that way and we're making a little bit more visceral but we're also giving you more control and more safety checks uh to kind of protect you better yeah but I just wonder I mean like this is a lot of responsibility for an individual whereas if I use something like zapo where they have the private keys in multiple geographies around the world uh that's kind of a level of protection that I myself can't probably implement right so why would I choose to use the Kasa method as opposed to interesting a company that can do it better than I can sure sure I mean and it it just comes down to kind of

personal belief and and the statement not your is not your Bitcoin so company like zapo uh great product great company we've heard nothing but good things we know some people over there and you know but it's just a different kind of model we can't personally maybe if you're a friend of one of the founders employee or employees you can go visit you know the facilities to make sure that those servers and the keys and everything else are there you are inherently trusting that company and that that they are running those and that they're not just kind of storing it on a server and someone's back office or in someone's house right you you trusting that those things actually exist it is to be honest like it is a lot of marketing it is

mostly marketing and they may actually have those bunkers and they do serve a real purpose but you're still trusting there's still that element of trust where we are trying to build the best possible system for you to self-manage and self understand and have the full power and this stuff it you know it may be tested sooner it may be tested later I think that we're in a time right now uh which we're very lucky with the the bare Market to where we're just able to build and build a lot of new features and there's not as much of a rush but whenever a bull Market's hit everybody looks around and the prices are shooting up and everybody is like oh my gosh you know if if this does actually kind of hit this hyperbitcoinization situation if the price is really even if they just go to 50K a coin even back to just 20K a

coin like the the the the the calculations become very very different the amount of money on the books becomes very very different and the way people think about these systems becomes very very different and we're only you know Mount goau there's the famous video I think of Roger saying oh yeah everything's fine at Mountain go something like a week or two weeks before it was just absolute Mayhem and they realize they lost all the funds um so it's it's you know it is one of those things to where it's personal choice it is some people are never going to want to fully manage this and fully take their responsibility for it but for those that do and those that that want to go down this path and want to go grow stronger through it um and that want the absolute best protection you know we're

going to offer that so let's talk about attacks as well which we started to do you mentioned earlier that if someone loses one of their keys you guys can easily replace that so in that case the other four keys are still usable you're just replacing the one that is lost is that correct right so the client can go they can grab a a a treasure or a ledger we work with both systems they can grab any treasure Ledger from any uh manufacturer it doesn't have to be us uh it can be directly from the manufacturer it can be from another store I could be one that they an extra one that they have laying around they can use any device and pop it in and reset their key

Shield we also offer for our clients we are authorized resellers for both treasure and Ledger and we hold extra CL extra devices in reserve there have been cases to where there a supply chain shortages or you know other factors uh would end up taking a week to ship a device or and if you're you know if you've lost a device and you want to get yours the next day then that's a problem so we hold extra devices for all of our clients so overnight no matter where they are in the world if they need a device you know we will ship it overnight shipping fast as possible most expensive whatever it is to get them the device as soon as possible so what if I'm somebody what if I'm a a bad actor as they say and I will use my sound

engineer Chris as an example let's say I go hold up Chris hold up a gunpoint and he's a casa user and I force him to report that he's lost one of his keys so then you guys give him a new key so now the and and so maybe what what happens is maybe I'm the attacker and I have brought my own treasure and so Chris now has the key on his phone the key at his house and now I I have Chris report a key lost maybe the the key at work is lost and then I say Chris have them send the new key to my treasure so now there's three keys at this you know one location where I'm holding him at

gunpoint so then can I force him to send out all of his Bitcoins that way does that no is that no because you you would still have to yeah so you still have to do it so you can swap in keys but you can't you can't actually access funds because you have to the funds have to trans for over so we've simplified the two steps that we've actually done we noticed this we actually um you know did user research and noticed that anytime someone lost or thought their device was compromised we talked to some people that um even just firmware updates that you know someone got scared that their device was uh malfunctioning what would frequently happen is someone would buy a new device they would reset the seed on the new device and then they would transfer funds from the old device to

the new device or or or they would um they would immediately transfer funds to a totally new fresh device and fresh seed right so we've taken the kind of middle step out and so what happens is you rotate in a new key you have a new key shield and then you transfer the funds you do a wallet sweep to that new key Shield to that new setup and with that new setup you still have to transfer the funds so in order if you were if you were holding Chris a gunpoint you would still have to travel with Chris to uh you know several other of his locations to actually trans for the funds and do a signature um to get the funds onto the new key Shield even though he even though he has two keys in his possession and I've now fashioned a

third oh okay and wait and so why wait and I guess what I don't understand yeah is that like so in this situation that I outlined where we've he's actually lost one of those or or sorry or we forced I forced him to report that he lost one of those keys then how do you transfer the funds to the new device if supposedly that the other device doesn't you know we lost it Chris so you have you're still having to sign with the existing key set so you're still having to sign even though you've lost one key you have four remaining keys right and of those four posession you have to still do a you technically only two if you're at a

location to where he had two devices so say he had his phone and he had um a device and this was at his home and his home safe or something then uh of the old key set there's still only two keys there so he's going to have to travel to another location to get another device make another transfer and it's that that that element of having to go multiple locations and interact with multiple parties that is the real security around all of this that extra time for most attackers is not worth it and in that extra time we have the ability to flow even emergency lockout um feature that just shuts down the account locks out the account so even as you're walking in the door if Chris just tapped that that

locks his account down entirely now if you had all the devices you could still get access to it that doesn't enable Casa to to do anything malicious um because Chris still holds all the keys it just slows down the process of executing any transfers because the you're not doing it through the actual end interface if that makes sense through the iPhone apps and the web apps and uh you would have to do it manually with at a command line in a more technical way so all of that just to summarize that again you know multi- device multilocation that model that protocol is what's helping protect Chris we are here as a service to help run that model and help keep those keys up to date it help provide service help uh

debug problems but at all times the end user is in full control they have the full set of keys Kasa is never in a position to where we can touch access uh you know end users funds and an attacker would also have to go these multiple locations you know to to get anything and then what if I get a hold of Chris's phone and then I flag a couple of his keys lost and somehow can access one in a new location then could I generate new keys for myself and then hack his Bitcoins so repeat repeat repeat that again if I get so if I get a hold of his phone

it's sort of it's sort of like we were we were joking about Sim swapping before the episode and so what I'm talking about is like it's not swim Sim swapping it's like if I literally just steal his phone and then I get into his Casa app can I flag a couple of his keys lost and then issue myself new keys but claim that they're his do you know what I'm saying and then use those new keys to hack his Bitcoins yeah the important thing is that with any of this key management the end user is doing everything so we as a company like we can provide we can we can we can help we help we provide a simplified UI and we provide some support service around it

but ultimately the end user is doing everything so what's important what I mean so what if I'm the hacker and I and I've stolen Chris's phone and then I pretend that I'm Chris and I'm doing all this stuff but really it's all I'm going to end up having the funds you would still have to have Chris's permission You' still still have to have Chris walk through the what do you mean how would we know how would you know whether it was Chris or me giving the permission so the the again the general Point here is that is that you would have to get Chris held at gunpoint take him to multiple locations at gunpoint across a pretty large period of time to be but I can't swap one ke yeah but but I can't just say hey those

devices were lost right correct just think think of it like this think of it like okay there are two stages in a in a uh key transition or in a key Shield update okay the first step is in flagging a key as lost or stolen or compromised and then syncing a new key set okay when you make that new key set that is a totally new set of addresses a totally new set and there are no funds on that new key set the second stage the second stage is that you actually have to transfer the funds from the old key set to the new key set and to do that second stage of that transfer even if you got some access to the UI and you

tried to swap in some keys and you generated a new key set you still have to transfer funds from the old key set to the new key set and when you're doing that you're GNA have to go through the process of going to multiple locations potentially a bank potentially offices potentially you know other business partners or siblings or family MERS to get devices right so can't I do that on my can't I open up a safety deposit box at my own bank and pretend that do you know what I'm saying like tell you yeah but you're so so so what what what I I think that the disconnect here Laur is around the it doesn't matter what you do SE separate this out into the new key set and the old key set you can do all

you want as an attacker to generate a new key set but you still have to get Chris to transfer the funds from the old key set and transferring the funds from the old key set is very hard transferring the funds from the old key set is going to require you to go multiple locations okay even is created yeah doesn't matter device has lost at those new locations exactly so it's like checking your IP or something like that when you do it it's it's um let's think about like think of it like this okay think of it like literally opening a new bank account sure you can go to a bank and you can use use a false name and you can set up a new bank account but that doesn't that's not going to put funds inside

that new bank account even if you used Chris's name and you set up that new bank account you actually have to go to his old bank account and somehow SC even if I've reported it lost even if you've reported a loss you still have to convince the the old bank account the old people to transfer funds into the new compromise fraud bank account and again the the the calculation here is that the level of complexity required for you to generate these new Keys new key set and go through and transfer all the old funds is extremely high going across multiple locations needing to know multiple pins over multiple days

multiple hours at a minimum potentially multiple days and multiple Geographic locations is extremely high and the chances that no one would notice are very very low and also keep in mind that the instant that a the instant that there's a you know that a key is compromised in the system we know about it as a company and we're calling to check on our clients and if we don't hear back from a client and a key is compromised and there's something going on you know then there there are procedures we have procedures with clients with different clients uh for whether we would call authorities whether we would call their family members whether we would call you know what the kind of emergency process is okay we're going to keep discussing this in a moment but first a quick word from fabulous sponsors within months

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secure tokensoft leads the market in providing technological tools to support tax Banking and securities regulations for issuers of digital assets we are honored to have supported leading companies in 2018 to learn more about issuing digital Securities successfully visit to tokens soft. or follow them on Twitter at tokensoft Inc back to my conversation with Jeremy Welch of Casa So when you say that like I as the attacker or or anybody would you know if they need to um kind of create new keys and you say that you require them to go to different locations how do you know they're in a different location we that's again that's that's the proof of a signature

of a device so um that comes down to using actually a treasure to sign a signature to execute a transaction on that treasure right or Ledger but how do you know that they're not how do you know that they're doing it at you know a place that's different from a different location like how do you know that they're not just doing two different signatures both Comfort my point is my point is that it doesn't matter like it doesn't my point is is that so I think what you're suggesting is that how do we know that the attacker hasn't gotten access to these extra keys and like brought them back to the home and is doing these transfers at the home or something what I'm pointing out to you

is it is a challenge just to get one of these keys and if you're going to a bank safety deposit box to get one of these keys and the client looks under duress or you're not the client and you're trying to go get the device under the client's name right no no no but the scenario I'm outlining is different it's saying I I'm saying I'm the attacker and I report that one of those keys is lost I get control of Chris's phone and I and so to your mind you casa thinks okay that device at the bank no longer works and then no no no we don't we don't we don't we don't that's what I'm pointing out to you is that we don't um our our system is not designed in a way that

says that again I would I would split this I'm trying to like create a simplified model on on on connecting this into the two different steps of like you can create all the new stuff you want but you still have to go get access to the old stuff uh in order to make a transfer and so and it's the protections that are in place around the old things that this this attack would not work so again I like just using a just using a simplified case okay let's use a and using a the existing Financial system which I think will hopefully clarify things a little bit more you know you have you have a you know you you go attack Chris you get some of his his information and you go open a totally new bank account at Bank of America okay turns

out Chris has been banking for a long time with HSBC and you go open a new bank account in his name under Chris you control it but it's under his name it's a fraudulent account okay when you open that bank account it doesn't have any money in it right right but it's a new bank account and it's a fraudulent account it's in his name but it has no money in it the only value you're going to get is when you can convince Chris or can convince someone else to transfer funds into that fraudulent account right so that's what I was saying if I have control of phone what I'm saying is that just by having control of his phone that doesn't mean you have control of his keys so it's like it's like you would still have to and the in the bank

account example you would still have to somehow defraud Chris to get him to send money from his old HSBC account to this new account and so in our case in our Cas point about the gunpoint could couldn't I just force him to say like hey report this one lost and then send the funds to this new yeah but again reporting a key is lost doesn't doesn't send any funds that never sends funds report report that it's lost and then also and then also get CA to you know tell them hey this is your new device but again that still doesn't do anything like that just just reporting it as loss and even setting up a new device that doesn't send funds anywhere what that

does is that that creates a new that's the equivalent that's the equivalent of creating a new bank account with no money in it and so there's no way that a an attacker could force their target to get Casa to send funds to the new device correct now what they could do is they could hold Chris at gunpoint and they could take him across multiple locations and they could take Chris to um and Chris you know I wherever you are I mean you're you're you're the example of this I hope you're doing all right yeah you're doing okay man um but you know I I I what would still have to happen is Chris would have to be taken at gunpoint to his bank to get access to this key the safety deposit box and to send aest

I guess but this is what I'm confused about yeah so like like let's say that he's not held at gunpoint let's say he's actually lost one of his keys and it's not at the bank let's say he's lost the one at the office if he reports it lost then how does he get funds onto his new device because he has the he still has access to other keys in the setup right so that's what I'm saying that somebody can hold Chris up and Chris now has the two keys one on his phone and one at at his home so yeah this is where I think okay I see what you're saying okay so the disconnect here okay is that the the the total and the three of five it has to be it has to be three of five of the same key set so in the old case right Chris

has a total of five keys he's now reported one as lost okay you're attacking him and you're trying to swap in a new key you've now reported one as lost so in the old key set he now has four listed okay as comp or four listed as working and one is compromised new key set is created total of five Keys okay oh but I thought you said that when when one is compromised that only one gets swapped in and the other four the same that's correct the it's not a new it's just no no no it's a it's a it is a totally new set of addresses that one new key with the old Four Keys creates a totally new key set

with a totally new set of addresses so in that case you now have two two key sets you have the old key set and the old set of addresses and you have the new key set okay so basically so wait and so just to understand so old key set has these five addresses a b CDE e the new key set even though there of even even though four of the keys remain the same now the the addresses are what is that f g h j exactly or XYZ yeah yeah and and again that's where it's like that's where this new key set is like a totally new bank account it is it is

totally fresh totally fresh addresses and so you still have to the stage that you're missing is that you still would have to attack Chris and have him transfer funds from the old key set to the new key set from the old addresses from the ABCD addresses to the new addresses for you know fghi right and that transfer that would still be very very hard right well maybe I could do it wa with Chris okay I know that was a lot about I know that was me as Bitcoins yeah I know I know that was a lot of back and forth and I know that was confusing and I I you know the this is this is complicated stuff it was it it took us a long time to map out this

model and the specific decision we made from a security perspective is that we wanted a more rapid response system and wrapping a lot of support around that to where we're you basically have two kind of uh two approaches to security either you're going to put yourself in a you know in a steel cage cement cage you're going to surround yourself with guns and you know everything's going to be secret and no one's ever going to know and everything is like tighten down as as fast as or as much as possible there's an alternative security approach to where you're you're it's like a rapid response model to where it's your ability to rapidly respond very quickly and I I we joke about this being like the Terminator model to where you have

this T1000 that keeps coming and in the tour M that keeps coming after them and it doesn't matter if you shoot a you know you shoot a gun into him or they they throw something at him or they hit him with a you know a big um uh some sort of um construction equipment it doesn't matter he keeps reforming himself quickly and coming and coming after them and in a similar way we're taking a model the old model of using just a singular device or using a singular cold setup at zapo or wherever uh with a singular bunker what we're creating is this faster model to where you know yes you have a you have you know a bank in New York and then you have a home in uh San Francisco and you've got a key at each of those and

you got a key at some other place and you know what yeah the the house in San Francisco might burn down but then you quickly rapidly readjust and shift to a new key set in a new location we're creating this more rapid response model that in each of those those situations you're you're kind of hardened down and you've got things in a fireproof safe and you've got things prey protected but it's that rapid response piece that's very very different and that's where is important too so I just thought of something else because so what if I hold chrisit gunpoint or or or either that or I get control of his phone and then what if I report the two keys in the other locations lost and then also now so now I only have two keys in my possession

because both the one at the bank and the one at my office have been lost and all I have is the one on my phone and the one at home then I call you guys or I make Chris call you and refashion the new key set and also move the funds so that way he last step that last step you you just said of just moving the fund that's the thing that can't be done easily and we can't we can't control that you the one maybe one approach thing this but I could force Chris to do that you you could attempt to yeah you could attempt to force Chris to do that and what we're and we've never proposed that we like totally lock everything out of the system what or or we to prevent any attacks whatsoever we create a scenario to where to attack you becomes

much harder yeah and the chances of someone detecting an attack increase rapidly because you got your keys in multiple locations you have a rapid response model you have a a big red button on your account that locks the account down and locks all access to just even generating or or flagging Keys a suspect right and sends alerts to us and so you have all of these precautions that makes it much h harder to actually attach or attack and it slows down any attackers and that's really want to that I'm definitely not advocating that anybody do this um this was more like an intellectual exercise um but actually I am not either I am not either I had a question which was um so

in the three of five so let's say that I want to make a transaction is there a time frame uh in which I have to have all the three of the five Keys you know participate in to make that transaction like do they all have to no no so you can you can separate them by multiple days you can do it totally as synchronously so you could do you know three or four days difference but yeah and what if it's like a week or two weeks sure it would still work now you know holding that you know that long and building a key set it would still work um and we've also talked about building features that you know time out after a certain period right now it's it's it's relatively open

um uh but there's there's a lot there's a lot that we're still building and I think that even even having time locks around accounts and around certain signatures is something that we'll build in eventually the the important I I I would just say that the important way to think about this um so we started actually with Glacier protocol and looking at the security model around Glacier protocol and totally off you know totally offline paper copies and the maintenance around that which is enormous we looked at Jameson lops set up uh you know he had his own custom setup and he would have to spend a day or two per year just going through and rechecking everything and our end goal was to take this existing models that existed that we that you know we're not

Reinventing the wheel we're taking these existing models of cold storage and making them easier to use we're building better user interfaces and better customer support around that entire process and yeah some people are technical enough to kind of reimplement the stuff themselves but the UI and this customer support and the speed it which we can react and help you is not going to be present in any kind of custom situation and so if you you know our company the positioning of our company is in building all these experiences you can look at the C of no is the same way people were building lightning and Bitcoin nodes before we made the ca node what we did is we made it much easier to set up we made it much easier to run uh we simplified customer support and setup and you know if something goes wrong and

we've spent you know our Engineers spend hours at times with clients to get them set up and get their node running and get them custom uh Port foring setups and custom router setups um it's that element of we're taking these complex Technologies and complex processes that exist and then we're simplifying it down to something that's usable and then you know applying all the customer support and we're going to do that in more areas yeah and something else I wanted to ask was about the $10,000 a year service why do people have to apply for that because it is a it's not a you know you could we could we you probably pop up a form and just have people pay it out but it is it is something that the setup is pretty involved you know we do initial

consultation to make sure that people understand what they're getting into and most people the odd thing that we've seen is that for a lot of our clients when they do kind of ask all their questions and they finally realize you know what it actually is the sale is very quick it is it is very fast you know we've had people tell us they've been looking for something it's it's it's been surprising to that end but there are a lot of people we talk to as well that you know they they want it to do certain things that are totally automated and they wanted to do certain things that custodial systems do that a security system that is more in your control just won't be able to do and so we we are very careful with clients in terms of like you know we we are very

careful with with their setup and with process and we're not you know they have to apply because it is a little bit more involved at that level no at the ca node you can just buy it you can buy it the day um you know it ships out we we caught up to we were shocked at the demand but we have pretty well caught up and it usually ships out about two to three weeks after you're purchasing um but the you know that is a much more rapid onboarding process okay yeah I want to get to the cost of node in a second but first I I just want to ask also so are there what are the factors on which you would reject somebody who's applied for the $10,000 a year service so first off you know we only support indiv uals and small teams we don't

support large institutions we're not designed as a solution we've had people kind of approach us around institutional setups and although we we do advise we've we've definitely advised companies and you know this specific setup and Key Master is built for small teams individuals families family offices right like those this Nexus of smaller teams or smaller families or you know one individual with one family member um or a lawyer or someone that uh that they're using using as a trusted kind of outside party those are the Dynamics on which this specific system is built we do have people that come ask us that they have a large corporation or a fund and they have a100 million and they're looking to you know they're looking to set up a system and they want to make

sure they have control and they've heard about our design and and our approach and our customer service and they're excited about that but we're just not the system that's built for that there are other companies uh Anchorage which just came out um um about a week ago Dogo they're building phenomenal product and um uh the Fidelity team is building they've announced their product last fall they're building phenomenal products I mean just we we've seen other teams that are uh looking mostly at that institutional side and we are not that right so we do have some filtering around making sure that we're addressing the right user as far as an individual there aren't there aren't as long as the user is technical enough and sees I wouldn't even say technical enough it's just as long as the user knows that this is not just a regular Bank like they are

running their own infrastructure they're running they're managing their keys um they know the security implications you know we do a kind of brief conversation around that then we'll onboard them pretty quick after and why do you not have multisig support for ether why is there only single key support for that yeah there's that's a great question so ethereum is the approach ethereum and we wrote a blog post about this ethereum does have some multi- smart contracts the logic around not supporting ethereum is that we didn't think that that the system was to a point to where we could be confident that funds would not be lost and they the the or if they were lost that they

would not be recoverable whatsoever and the specific example around this is around the parody situation and I'm not sure if you're familiar with what happened with parody multisig yeah I am but why don't you fill it in for listeners who maybe don't know sure so so the parody multisig situation it wasn't exactly a hack it was a a a developer I think it was a young developer like a new developer on their team that was going through and testing some scripts and happened to accidentally delete a certain piece of code that was critical to some of their multisig wallets that was they say they say it was an accident well well there there's there's an open question I mean I we we know some of the

parody folks and they're they're great people and very smart and I you know this this was kind of a shocking situation but the the more shocking thing to us is that you know we saw in the case of the da we saw there was a fork and there was a reversal of the transactions in the case of parity there wasn't right and even though it was a total accident um even though you know was totally unintentional there was no reversal so those funds are lost that's over I think it was over $100 million it's just totally gone and in that case so we we look at it from two ways you have to have the actual system um and code uh has to be has to you know has to work well has to be logically sound has to be well tested has to be vetted we

you know we think that Bitcoin is definitely to that level we think that there are some other coins that are that are uh approaching that level and but Bitcoins by far you know leagues Beyond most anything else on the multis side but the other thing about Bitcoin is that there's only one multisig solution uh there are a couple details of implementation on on how you set it up but the there's kind of one dominant way to do it and the entire Community uses that and what comes out of that is if there were a break if there were an issue with this implementation there would be no choice but to either run a hard fork or do a soft fork or some other fix to make that fix in a case on ethereum to where you have multiple smart contract

implementations You Know parody is the one that got that got hit in this scenario there was no change but there are several others and you know if what if you're the one that got hit with a bug and there's no guarantee that the underlying team would have the incentive or the core developers would have the incentive to fix this core issue that led to your your hack and so we just don't think that for our for our users funds for you know recommending to our clients we don't feel comfortable recommending multisig on ethereum today because it's not consistent or it's not you know fully sound on both The Logical level and on the community level um so even you know there's been a movement to get

some smart contracts formally verified and get a lot of outside tests and that's great that would be this kind of first level around formally testing the code making sure there are no bugs making sure there there are no holes but again want to remind you that in the parody case a lot of that code was tested a lot of it looked perfect a lot of it looked great yet it was still able to be deleted and there was still an issue and them not you know not wanting to do a reversal so just because a smart contract is uh formally verified and fully sound doesn't mean there couldn't still be an issue like the parody hack yeah so we're running out of time but let's quickly talk about the ca node so as you mentioned earlier it's both a Bitcoin node and a lightning node but

why so why would someone want to run a Bitcoin node when they can't earn money from running it so the Bitcoin note itself I mean that is part of partially supporting the network on the lightning side you can you can earn money you it's it's uh around routing transactions now the amount it's and Toshi so it's a much smaller amount total amount but you know you can earn some and and today a lot of running a Bitcoin node and running a lightning node um it is a somewhat Niche experience it is a kind of early adopter experience that is changing there are now games and applications around lightning that are you know we think 2019 is going to grow a lot on that side and we've heard of uh even several teams

that have shifted their entire Focus towards lightning and lightning applications that you know that's not public yet but I I would just say that you know on the Bitcoin side it's about securing the network um in the case of segt 2x and the move to do the fork and the no 2x movement you know I I like um the uh impenetrable Fortress of validation example that I think it's stop and decrypt that that has this uh example and and the you know Bitcoin running a node is about validating the broader Network and validating the broader transactions and even the miners are creating those transactions and creating those blocks or creating the blocks of transactions those still have to be accepted and validated by the broader community so running a Bitcoin node you are doing a kind of community

service and validating the broader Network and strengthening the broader Network and I think that that's going to become more and more apparent and more and more of a kind of personal thing for people and and contributing to the network but on top of that I think you're actually going to get this day-to-day use case and much more you know just kind of pure applications use case around lightning and so do you imagine imine that eventually that lightning will be kind of how people end up using their node more often cuz I I I don't well that's how that's how it is today yeah the majority of it today is people use their no for I would say 90% 90% is is lightning 95% the way to think where they use that because there's not many places right where you can use lightning

no there's a lot so first off people are people there's this thing um there's a um I I forget exactly what the hashtag is it's like l trust Network or something there's there's a there's a hashtag where people have started a chain it's almost like a chain letter group right but they're sending lightning transactions to get to each other just to create this chain of transactions so there's there is this kind of like Community experience around engaging with your friends and the broader community and sending this around so that's that's one that's a very base level I'm going to connect with my buddy he's got one at his house I've got one at my house we're going to send transactions back and forth Just For Fun just to be a part of the lightning Network right that's one two is that there are these applications

there's satoshi's place to where you can go and you can draw on this uh page and you pay for it enlightening um there are there's a like a a spinner application um there's a now a tipping application uh Tipp and.me um you know there are and there are more people are building more and more applications and I think that you know where this goes is that we could see applications emerge to where you do go you you you know you instead of voting someone on a comment thread with just a single vote you're actually up voting them with a Satoshi right you could see a Reddit being rebuilt on top of lightning and all of the not on top of some other coin but on top of

lightning and on top of Bitcoin to where you're actually up voting and being able to send Satoshi as you know some mechanism to um and I think y'all's actually is allowing some of this in terms of payments to just read articles uh today so there are there are a variety of applications now it's it's still a small set we're still in early days of this whole network but I think 2019 is going to see a lot there and our our end goal with the casa node is you know we we describe Casa end kind of end implementation setup as uh a node in every home and a key manager in every pocket we want to get to a world to where the internet is rebuilt uh around nodes and around validation and around kind of more personal control of data

and also around uh better Key Management and if we you know those two things in combination we can rebuild a lot of applications and services uh and so this is just the beginning in terms of uh you know Bitcoin en lightning are most important but we are are envisioning a lot more applications a lot more ways to use those devices now that they're in the home and we're you know we'll be announcing making a bunch more announcements um throughout the rest of the year for that so yeah well that's what I was going to ask you because I guess like right now it sort of feels like you're targeting these small niches right the people that have half a million dollars more of cryptocurrency the people that want to transact enlightning using their own node at these very this very small number of

places but it sounds like your vision is that in the future this Behavior will be more mainstream is that what you're saying that that having your setup oh interesting 100% And I would I would liken it to I mean I in the early days of the internet and you had 28.8 modems and dial UPS and people weren't even dialing up through isps they were just dialing to each other and dialing into message boards and sending messages around in the early days of the internet and somehow we got to a Facebook and Google and you know this massive applications based world where people write entire documents and watch videos and watch TV and all of this data is streaming over the same network and a

lot of it's advertising built but the the the incentives around Bitcoin and lightning and these other based systems we could we can rebuild a lot of Internet architecture and a lot of application architecture around these instead of around the the Advertising based systems that we've seen before and so that that's where we see the market going and again I it's it's still early days we're not proposing that the devices are built today are are ready for the kind of common person but the ca node is built if you want to try lightning and if you want to try these early Technologies it is built for average people to get to plug into the wall and to just you know get up and run it so we we do have working on a lot more I can't share um all the details

there but there's we're turning what I will say is that we are turning Casa into a sovereign experience at every price level and we want to make that easier and easier for people so that it's not just about Bitcoin enlightening it's about broader applications uh but about this ability to kind of opt out and kind of take more control of your data and take more control of your kind of computing life uh more broadly and so over 2019 we'll be launching a lot more around that with multiple price points and multiple support points and multiple products that kind of fit into this this Sovereign experience all right well we'll see if you guys are able to capitalize on this um sort of sentiment that's going against the current model

of the internet um I don't know I I could see it going either way there's momentum against right now but also there's a lot of uh what's the word I'm looking for not the opposite of momentum but oh inertia where people are just lazy and willing to sign away their privacy um all right so I have so many more questions I didn't get to ask you but I was going to ask you is it okay if I just email you a few and then maybe you could write them up and I can print them on publish them on the website yeah it won't be a ton but but yeah we'll I'll just try to be selective because we didn't get to everything yeah no problem um but in the meantime where can people learn more about you and Casa sure so uh you can go to keys. Casa

is primary website uh if you want to buy a node right now you go to store.ca s o r e.ca Casa um and you can buy the lightning node today um you can also apply again for the Key Management Service um keep your eyes peeled even in the next few weeks we have a lot more coming uh and uh excited to announce the team's been working insanely hard and I you know as um it's we've we've got a little bit bigger team than most people realize and you we've got Alena and Jameson lop and a a few others that just the team is amazing uh so we've we've been grinding away and I'm excited to to release some of our new stuff in 2019 and kind of see what the world thinks yeah actually one of the questions I'll ask you uh for the for to put on the website is about your

team because I do think they have interesting backgrounds all right well thank you so much for coming on Unchained of course thank you Laura for having me thanks so much for joining us today to learn more about Jeremy and Casa check out the show notes inside your podcast player new episodes of Unchained come out every Tuesday if you you haven't already rate review And subscribe on Apple podcast if you like this episode share it with your friends on Facebook Twitter or LinkedIn if you're not yet subscribed to My Weekly Newsletter go s sign up right now on unchain podcast.com and also go check out my other podcast unconfirmed if you haven't already Unchained is produced by me Laura Shin with help from raen gapol fractal recording Jenny Josephson and Daniel NES thanks for listening [Music]