MPC Custody: How to Do Key Management the Right Way

Transcript

um welcome everybody um seconding the words it's very nice to see people face to face again obviously the times of just wearing an iron shirt and those pants are over uh in soon calls so um i'm very happy to welcome you today here where we're going to be talking a little bit about key management now um i will be covering quite a few pieces here on the one side why of course your private keys need to be secure depending on what kind of business you're doing i'm very happy in order to have a conversation about this afterwards also very hard to have uh our head of sales europe and uh marcos who's basically running switzerland here as well um there are a couple of points that i'm

going to say in terms of like an intro of what we're going to be covering we're going to be looking into um a very very important topic in and around the institutionalization of this base for four years um we've been sitting on panels and stuff we've been talking about institutions coming into the space didn't really happen now at a different time it feels different i'm going to tell you why on the other side of course we're going to be talking about how we are securing keys the other solutions that are out there and why npc is a good choice from a security perspective first and foremost as well as going into the little bit more in-depth use cases of

how you can make them um applicable from a custodial level if you interact on the trading side if you are a corporate treasurer if you are a payment processor if you are a neo bank there are all sorts of different ways that you can basically um interact with the space as you all know um but of course the underpinning custody layer is absolutely crucial there to kind of give you a little bit of an overview of copper so you know who i am so i'm one of the founding partners of the chief revenue officer we do this now so we started this whole circus about four years ago um it's it we come from the traditional finance backgrounds ourselves uh mainly asset management and investment banking but then of

course the other side of the whole uh spectrum is please come in um is uh the technology piece um when it comes to the technology piece of course uh we basically had to find a way of we had to find a way of bridging um the gaps between technology and finance and that's always a very very hard job to do especially if you talk about digital assets it's scaring a lot of people did four years ago some what do does now we now are a little bit out of date it's about 450 clients we only cover institutional clients i'm going to give you a little bit of a breakdown of who they are um we've got about 20 billion of assets under custody it's actually uh going towards about 40 by the end of the year given the current

pipeline the business has grown as well while we were just forced sitting in a cool flat and shortage trying to figure out how we can revolutionize uh finance we know about 220 people globally we're headquartered in london uh we've got a office in new york and also one in singapore um and last but last but not least uh the exchanges bit is very very important due to the client type that we're servicing um client types just to give you the breakdown about 60 um of our clients are crypto funds um another 20 which are market makers hfts and prop shops and the last bucket are the in terms of like setup and use cases of the infrastructure when it comes to the custody bit

payment processes neobanks coin foundations this type so very much custody focused when it comes to securing their assets uh which of course in many cases are in the billions now in order to kind of kick this off um and i think it's a very very important one um you know the retail angle i think we've got very well covered but people are interested in order to understand of how we're going to grow this space and when it comes to the growth of the space uh the institutions are of course driving that um over the course of the last like three years you've seen quite a lot of news um if you look at the names that you see i just basically put a couple out there

we all know tesla and our good friend elon which done very good things for bitcoin and unfortunately also for doge um and on the other side of course also relatively bad things for the steeper tweets um but what you have is you know paypal having a board up curve uh which was another mpc custody solution and you've got of course the great deals you've got emy melon that is going to start offering custody i'm going to be talking about our enterprise piece a little bit later especially in and around the custody and key management um as well as you know in and around you know rafa you know all those names and you've seen them over and over and of course those guys are mainly long only uh holders mainly in and around bitcoin um

we we can go into some depth in and around the fact of like how different chains are interacting or more complex when it comes to securing them like airweave and others um but it kind of tells you very very clear driver of what what is actually happening in that space even though very early on custody of course becomes the driving force then anything that you do on that front is basically underpinned of how you secure the assets and how you can interact with them um when you just look at the base layer of custody of withdrawals there is a that's a whole topic in itself we have taken an approach of optical air gapping but i'm going to go into the different type of temperatures and how you basically

interact with the assets deposit and withdrawal in a second when we talk about npc in further depth but what this series showing mainly is i mean the curve is pretty clear and some of you that have been encrypted early on i'm sure everybody's very happy right now but it comes down to the fact of how this is going to evolve going forward now it's not the first time that we've seen um a asset class and i think we can all agree by now that this is our right kind of grow all the time equities is a very very good example here and as you can see over the last like 70 years 80 years the split was very very different between the institutional part and on

the other side of course the retail piece the space that we're in is moving at an insane speed and anybody who is working in the space here which i'm sure the vast majority is you will see that of course the uh um the way that this is adopting is happening very very quickly for example d5 is a very very good example it's like we didn't even figure out the centralized finance yet and we're already talking decentralized so there is an insane amount of speed and solutions and innovations that is going to happen over the course of the next three to five years which is going to mean that we are seeing quite a dramatic shift between the institutional players on the market and you see news coming out every day

and on the other side the retail piece which is the good side about this industry because as you know everybody could theoretically be a maker everybody could be a taker so on that front there is a lot a lot that we will see in terms of the adoption rate on average if you look at the last 10 years of data that we have especially the last four years you can kind of look at a factor factor of about 15 in terms of the option rate in order to catch up with something along the lines of 75 being an institutional being being an institutional driver and that comes with a lot of um a lot of questions um i'm spending a lot of time the whole team globally spending a lot

of time speaking to those traditional guys the blackrocks the millenniums the citadels the mans of this world and they all have the same question number one on the one side how can we reduce risk in any shape or form that's operational risk that's counterparty risk and on the other side of course how we can how we can participate meaning access so how am i able to interact with exchanges how am i able to interact with market makers directly otc desks how am i able to interact with peers how am i settling so all those all those points are absolutely crucial when it comes to when it comes to understanding of why we do what we're doing i kind of mentioned a couple of those points already but um

when it comes to the digital aspects you have those three main buckets i kind of mentioned them already the operational risk is extremely extremely important and you need to have solutions in order to access their space efficiently operationally we have unfortunately seen over the last years fraud case happening left right and center i think the latest one which you may remember is anything around virgil virgil was a very good case assets weren't secured within a enclosed ecosystem we had a trial for this that we released about three years ago which is called the world garden which basically makes sure that assets can travel within that uh ecosystem but cannot leave others by now have copied that actually some of them actually called it the same thing which is

they could have done a little bit better on the other side of course counterparty risk is a big big topic um simply from a custodial perspective because what you're faced with is that exchanges are also acting as custodians now our view is that this is a really really really really really really really stupid idea most of them of course have a real concept of segregation of duties the regulatory part is going to play a massive role there but if you're in charge of matching and execution you shouldn't be doing custody and for that we basically release the product called clearly which we're going to talk about in some in a little bit towards the end the fragmented and evolving landscape um

this is also kind of gives you a little bit of a of an insight with regards to defy the optionality that this asset class basically allows you to do and i mean optionality in terms of liquidity and in terms of access you have the ability to theoretically let's spin this forward right you sit on the airport and you've got an insurance contract on the delay on your plane and while you're sitting there you could basically theoretically trade that in a smart contract against btc or rap b2c so what do you now suddenly have is the ability to inject liquidity and have liquidity pools where you would have never been able to do this beforehand never mind cross chain and all these and all the good stuff that you hear it left by the center in terms of innovation that is happening that drives this place

forward for this of course you need a certain set of infrastructure in order to do this now the way that we have done this and i'm going to go now into uh how we are securing keys and why we chose mpc mainly um and actually what we've done day one because we didn't use mpc all the way through um you need to have proper safeguarding capabilities and um you will hear a lot of people say because there is key management on an npc basis we're going to talk about this that you are a custodian that is not true uh custody is being done in a very very specific way and if you want to use mpc you need to use it in its true format which means that you need to stay in

segregated instances we're going to go into this the trade infrastructure i'm going to talk about lightly but this is not necessarily the case here we want to discuss in this masterclass so why npc actually go straight to the next slide there are different types of how you can provide a custodial set up and how you are securing your keys what i mean there is um most of them you are aware of hot wallets is one thing one from an institutional perspective that you mainly are going to shy away from um it is not necessarily based around the fact of key material itself like in

terms of in terms of its it's it's its true form it's more about the fact of like do i have a centralized risk point meaning is there a private key in its entirety sitting somewhere which is which is a key part here um now hot wallets you know you all know how this works you put the key online there are different ways of containers whatever it is and you basically just have push a button there might be a governance level that sits on top of it in order to approve a transaction and ultimately the transaction is being broken software wallets is pretty straightforward as well but again in this case here specifically you're dealing with a private key in its entirety and there are quite a few of those solutions out there again you've

got a centralized risk point hacking i i cannot tell you i mean how our business we are in the business actually of security more than anything we've got about 30 people sitting there simply on the security side if you would go down those rabbit hole of like what people nowadays are capable of you will potentially never touch those acid files because you're scared you get you get this sorry and when it comes to this of course we wanted to take the approach in order to kind of distribute this by default um um hsms a solid solution don't get me wrong um but also here there are various ways of how you can do this just as an overarching uh overarching approach when it comes to security hardware security

modules is a way to do it there are several providers you know uh the old ones for example um that have been like actually using it with something component dogs and guns and guards but there is a cable sticking out somewhere um which means that you have a centralized wrist point after all key shouting this is what we opted for when we actually released custody for the first time that was mid 18 march april 18. what we were using at that time was uh shami's secret sharing which basically means that you are creating a private key you split it up into parts and then encrypt the parts aes to 56 pdf p2 but the part here is the important piece of life why we ultimately opted into secure

npc and there are several there are several points here on the one side npc was around for a little while and i'm going to show you uh uh why but um the question was how are we able to eradicate single and central points of failure whereas being able to allow clients to be effective when and efficient when it comes to their operational business on a day-to-day basis which is a very very thin line and the way that we uh basically implemented this apart from withdrawal process when it comes to the optical air gapping fees which i'm going to talk about is the fact of like making sure that there is no ability in terms of segregated instances to either recreate or ultimately fetch

the key material even split even you say you use npc but it cannot come back to a central point now this is the difference between true npc and npc solutions uh which is the way that basically we set it up and i'm going to show you which which way does that who started this um mpc originally comes from good old professor andrew yao uh um he has been working on this for a long time until it basically was released mpc in its nutshell was actually used for completely different purposes which is in combination with uh zkp's which are zero knowledge proof protocols uh are very very useful in a nutshell for people that

maybe are hearing this for the first time zero knowledge proof is in a nutshell sharing information with each other without ever revealing the information itself so you're able to theoretically imagine you walk into an american bar and you look you know young and you say i want to order a beer and all you need i want to see id you don't have to id i know you are so in in this very simple storm but we're going to talk about how it can be used in this case in 2008 it was used for a danish sugar piece portion um you see in which way was basically done a fits where bits were basically matched with uh sellers and ultimately without ever disclosing actually all the details and identities of the bidders

the spin of actually making this available for cryptographic assets is was a little bit more complex and it took a little while um i think mpc really properly got onto the stage globally in like not 2019 2020 and in and around then and it was a very um it was an early stage technology to be quite frank um but in this case now if you want to secure your assets properly um i think there is no way around in order to use empty technology to do so now kind of coming into the point of like um how you uh do the key management itself now the way that we do it um maybe maybe give a little bit of a of an inside there the

way that we do it is that you have a you have an application for copper unlimited and that application lives in segregated instances i.e on copper side somebody sits in london or new york on the client side somebody sits in zurich and a trusted third party which is the third part of the puzzle is sitting in paris now those three instances always stay segregated whereas you need two out of three in order to sign a transaction um whereas the trusted third party doesn't play an operational role at all are they just there as a failsafe uh in mind that you have basically encrypted backups as well but features there in order to uh for an added peace of mind but the important part is that during the creation of the wallet and

ultimately the uh public address and your master private key that first and foremost private key never exists in its entirety ever you only have distributed key material that basically sits in those segregated instances and we as the custodian never pull this back which is one of the main differences but i'm going to come to that in a nutshell what that means is that you have a um that you need to derive your addresses from the elliptical curve equations which is basically underpinning various blockchains now depending on what approach you take that elliptical curve equation is basically linear it looks like this and you basically take three r points and from that point you basically then derive your key material ultimately

now on the npc side those elliptical curve equations look completely different they look like this you have to imagine it kind of 3d as well and those are points are being chosen randomly which means that if you actually in a in a for example in chinese secret like key sharding you pick one and you actually are able to depict this it is quite easy in order to go along the curve and figure out the other parts does that make sense i hope it does so the way that we do it is like i said basically moved across three instances uh in segregated in segregated machines and ultimately segregated instances before um and you need to have a three in order to sign the transaction the process

takes 20 seconds and what you are left with is basically a key shot that is subject only to your to your instance and subsequently is interactable with whatever you have sitting in custody now during that process we are never pulling back the shots that are created in those segregated instances which is very very important because as i mentioned before centralized risk is a massive topic so what you don't want is having those shards sitting somewhere centrally accessible to the custodian which is uh in our case the way of why we're doing true npc in this instance um we basically covered a lot of this

already but the more important part is of how you are how you're drawing attention to when you were choosing your custody your custody provider and there are certain questions that you need to ask um when it comes to when it comes to the other approaches hsms key sharding software wallets whatever it is those things are basically been answered quite simply but when it comes to custodians on the npc side there are certain questions you need to ask and those questions are mainly in and around where does my key material ultimately sit you will potentially hear answers in terms of different instances different servers but a server is always a risk point because it's just somebody else's

computer in this case it is very important to understand of what the key differences are and in terms of this of all the different approaches that we've seen in this industry in terms of securing assets and securing the keys this is just a very very small representation of what the risk levels actually are the good thing is that from 2017 you see that the number has in terms of theft has decreased which means that you also get a more fragmented way of securing assets the number has gone up of uh hacking cases but ultimately the amount of money that was stolen is relatively relatively on the low end so it's it's kind of dipping off if that makes sense

um which is the only reason why is because you have uh more sophisticated custodial solutions that are out there kind of targeting and trying to figure out of how to disable those centralized risk points that are vulnerable to to hacking or whatever else it is even internal fraud which is the important part if you are a custodian and you have for example clients clients key material you should not be in the position that if somebody goes in there from the operational team because he lost his mind and deletes all the material that is available from the client your assets cannot be lost that's the important piece the way that we did it that's basically solving that problem

apart from others and i mean you potentially heard of a couple of those i hope nobody was affected by them no um but you basically see a couple of those a lot of those as you see now like going more into the device days and this is why i am that why is why copper is a little bit more cautious when it comes to d5 we do have a d5 extension that allows you to interact with your mpc wallets and smart contracts currently ethereum we are in i think two weeks time we're going to release solana and and polygon as well matic um but we are very very selective of the uh smart contracts that you're actually allowed to interact with because there are some out there for example that you

pre-sign transactions and at a later point that come and wipe your wallet and only a certain portion of the assets is actually leaving you're leaving your custodial wallet to begin with so those are all things that you need to kind of which people normally are not aware of from a cryptographic and from a pure defy space there is a lot of stuff that i still need to learn if you're interested on the npc side i highly recommend that you read professor lindell's paper uh um uh he's kind of been speeding this uh especially when it comes to digital assets and there is a handful of people that understand the cryptography to be brutally honest thank god we've got a couple sitting with us but what it is ultimately comes down to the fact of not having any representation of this year

going forward because you this both numbers here should be slightly zero and definitely not in the millions or independents coming back to the point of like the pure custodial side like i said it is very much is very much driven by having that base layer that base security layer available which people would go like down the road of saying okay custody is a commercialized topic in many ways i'm i'm i'm disputing that but it comes to the fact of how you're able to interact with your custody with whatever it is exchanges like i said earlier direct counterparties defy

and those points need to be addressed and what we basically done at copper is we tried to figure out over the last four years of how we can do that um and we derived that basically solving one problem after another but the key problem talking about custody i kind of mentioned this earlier is based in and around exchanges and exchange custody is a scary one in many ways for retail retail exchanges are going to be doing fine uh what most people don't understand is that exchanges are sitting there basically rehypothecating the assets that are basically deposited in some cases some not and ultimately making a truckload of money which you don't see a

penny send off but they are they it's very hard for them to give that revenue line up right now from an institutional perspective trying to go in if you just imagine you're blackrock and you tried to go in and i'm sure some of you worked in traditional finance to go in and explain to your compliance department why it is okay to pre-fund an exchange that is situated and or regulated on the island of barbuda and you're supposed to pre-fund your your initial marginal capital it's going to be a pretty short conversation which means that in this case you need to find a solution for that problem and the way that we've done this is by utilizing our custodial i should have looked at the next slide here i kind of jumped ahead a little bit

sorry hold that thought uh i'm i'm gonna come back to that um our custodial infrastructure um and what we are offering on that front we're talking about the key material and how you can utilize it of course in the first instance you would automatically think of cold right um but of course there are different types of temperatures depending on how operationally you want to be involved and how operational you want to be in terms of efficiency what we are offering is basically three temperatures uh um you have the cold solution where the client shard as well as copper shard is offline you've got the warm solution whereas the client chart is offline but they request that copper shard is online so they

don't need to wait on assigning anything and hot stands for itself there is a secure docker container you put that nec key material on that server and ultimately you just have the government's layer of platform that basically says okay which can go very very granular you can go like anything up to two btc nobody needs to approve and from two btc to 100 btc somebody needs to call out the chief information officer or the chief investment officer from 500 btc to somebody please call president biden and he needs to approve this person so you can go extremely granular depending on what white listing and all this kind of stuff comes by default but those are just layers of security they need to ask the questions for when interacting with a custodian

which basically comes to use cases um some of the client base that we have uh coin foundations i mean some of them are in public knowledge for example algorand they've got significant amounts of money with us um is basically how you can arrange that now uh and also calibrate for example how you can manage your treasury effectively and normally it is a an array of different types of temperatures and different wallets we can also calibrate in between we've got quite a few exchanges coming to us as well right now because bitcoins seem to have halted any sort of innovation quite a while unfortunately and what it basically comes down to is the fact that you have the ability not only from a treasury

perspective in terms of so every single of those boxes here is basically a bolt and those boxes ultimately can interact with the proxy layer that sits in front of it which is very important for user deposits and ultimately in order to manage withdrawals as well the beauty about proxies is if you the way the way that you can set it up every single proxy if you want to reuse it fine if you want to burn it fine ultimately it comes down to the fact that every single of those proxies you've got a wallet address which is like a unique reference code so even if it ends up in a treasury in an omnibus treasury you can always theoretically pick up exactly the ptc that you put in because you've got the reference of the proxy wallet that sits in front of it and yeah in terms of calibration you can

have the biggest amount normally sits in cold storage uh then of course you've got the warm functionalities that's more like in terms of interacting with the hot wallets and should you want to do bulk withdrawals or whatever it is you basically have a certain portion sitting in hot but from a risk management standpoint that normally is a very very small amount but this is how you can basically on the back end in terms of the technology stack when it comes to the npc site you can interact and basically create the treasury management accordingly which is not only used by the way by by by foundations or or alike it's also used by funds we have a couple of funds that i can use that approach as well now i kind of mentioned this before in terms of asset support that's a big one

the interesting part is like a year ago everybody was just talking when you talk about the institutional side and the adoption everybody was just talking about bitcoin bitcoin ethereal maybe now the uh since especially on the alts liquidity has increased quite dramatically people are quite interested in order to go into that space as well now your support layer of assets that you shouldn't unfortunately in this case this is actually wrong this is the wrong number um we're now i think 43 guys yeah that's 43 yeah so uh layer ones that we support and subsequently of course the layer twos last week alone i think we added 63 new layer twos i think it was algo and erc

tokens nsl um so we're extremely fast of adding new ones um which is of course all underpinned with the back end security procedures the q and a stuff i mean this is ultimately then what you pay money for that's why i'm standing against the fact of custody being a commoditized topic in a shape or form at least not yet interoperability and this is what i said like please hold that thought now when you have when you have custody you want to utilize the assets somehow and in the early days we had to find a solution for um mainly the funds in and around the fact of like okay i can show that i have a custodian

but my clients my lps my investors are asking me the question okay if i give you my money is there any chance that you can misappropriate it now given the fact that exchange is acting as custodians you can try to wiggle yourself out of this question but ultimately you have to agree to it which is a big big problem now in this case the way that we've done it and wall garden as much as i love this product because it absolutely put us on the map it is a dying creature because in this instance what you have is assets sitting on the exchange and to the points that i mentioned earlier if you are a traditional financial institution never mind the problems in around capital efficiency and counterparty risk which i'm going to touch in a second you have um you have relatively well

there is only so much risky diligence that you can do on those exchanges in barbuda like i said where ultimately comes into the point now of what clearly does and you actually have heard about clear loop a little bit uh in the news and then maybe some of your peers we've got quite a few clients in switzerland as well is designed in order to do two things whereas interacting the base layer is the custody layer in this case third capacity for exchanges on the one side to increase capital efficiency which is a massive one and i'm going to explain why and minimize the counterparty risk which we have kind of covered now already in terms of like you know operational risky diligence that you need to do on exchanges

having assets and basically holding keys to the assets that you preheat there by someone that part here of course is extremely important especially for traditional guys getting into the space we're talking about in many cases nanoseconds in terms of how we transact trade in the traditional world um 14 minutes 15 minutes or half an hour and if you move ethereum sometimes you can pay a thousand dollars and it's still not there at the end of the day you have you have inherent problems when it comes to utilizing your capital and what cleargood basically does is very simply interacting with exchanges on the basis of your assets sitting in secure mpc custody so it's your

segregated account where assets are sitting put and all you do is paying tradable balances to the venue which are becoming available instantaneously instantaneously not not not true we're talking about 70 to 80 milliseconds which is vastly better than a second which is definitely better than five minutes and definitely better than an hour so what that basically means now is that you have the ability to loop assets from one menu to the other in this case currently it is it is seven um with therapy bitfenix uh coinflex and so on but you potentially have seen the news on bloomberg et cetera ftx is currently integrating okex is coming cool coin by bit and bitcoin as well and uh what basically is happening is

that you have the ability now to just simply unlock balances but the assets are stationary they never move which is which is the beauty they stay in your secure npc's your wallet um and you settle post trade so that means you execute on the venue like you've done before you still have the relationship with the venue directly like for example christoph is going to negotiate with you the fees for example for finance and what is happening afterwards is that you then should say okay i'm going to settle external from in third-party custody the way that it should be the com if you want to compare it to what we currently are doing or mostly with most of the exchanges is that you would have to open an account on the new york stock exchange send some money then or to buy apple shares that's just simply

not how it works so in this case um you are solving a load of different problems on the one side of course external actors which you don't have any control of uh misappropriation the venue that basically holds your answer has control of that and of course interference when it comes to acid seizures we've seen this in some cases that the doj for example walked in in opex's case and said well you guys have done something wrong on the compliance side or whatever it is and basically withdrawals are ceased now your assets are sitting there for the next three to four months and you don't know when you get them back you don't want to have that problem and basically copper sources generally i think i'm pretty good in

time um i'm very happy to take a couple of questions uh it would be great to it would be great to kind of chat with everybody afterwards like i said mike who's a head of sales europe and marcos is sitting on the far back for some reason and uh please find us if you have any questions and very much looking forward to chatting later thank you very much what the regulators think about all of this well i mean regulators they have a very

very hard task ahead of them because they do realize that there is a saying in english like trying to squeeze a square pick through a round hole is not going to work here so what they have to do is completely rethink of how this industry is going to be evolving here and i'm not talking about by the way i'm not talking about bitcoin and ethereum here at all if you ask me personally i couldn't care less that's the basics that's exactly what i'm coming to so when we talk about the tokenization that is the that is the interesting part like i said for the time being bitcoin ethereum cardano algorands solana they're all the same for me and they're not going to be all of them that you currently see on coin market cap are not going to be here in about

three four years time what it comes down to is what you ultimately classify a certain trading instrument or a certain a certain asset as and the securities bit is pretty clear so when it comes to interacting with securities you have a pretty stringent and very very straightforward regulatory layer now we're not there yet for us i mean you potentially have seen the news so philip hammond has joined us at copper who's the ex finance minister of england and philip is extremely involved in mainly on the educational side which is the big part that all of the actors that are currently in the space from an infrastructure layer have to play but right now i think the furthest ahead

of the americans a certain extent even though the sec said there are there are securities and there are not securities and then you ask which ones are the securities can't tell you that yeah but when it comes to the infrastructure layer and how you interact those rules will be very very clear but it depends on how you ultimately treat the basic underlying and that is and that is still relatively open time frame on the regulatory side i think you will see a couple of reggae switzerland is quite good actually um but you are you are you are looking in terms of like i need to ask the question back what with regards to what custody with

regards to trading with regards to derivatives with regards to like what because there are different layers to this i think the baseline you will have some good regulation coming out some some proper regulation in terms of europe i can't pick which one yet in the term in the course of the next one to two years but it will be very very specific in terms of are we talking derivatives are we talking custody are we talking any sort of trail are we talking no d5 that definitely won't happen but uh but you know what i mean so it's a very hard question and i wish i would have the answer but i don't have it i think so yeah because what you are now what you're now fronted with is if boris beliwickski from copper calls

up and says like we want regulation which we've done now for the last four years nobody's gonna you know nobody's gonna do anything steve schwartzman mary think jamie diamond or brian mona had called up and said we are going to do this now so you are you have to give us a framework in which we can operate in that's a different ballgame right so and this is happening right now yeah the congressional hearings that took place a few weeks ago but half you basically just answer the question yourself it's investor protection the only reason why the regulator exists is in order to make sure that retail is not getting screwed over so so gensler's message if you read the

i'm sure you've seen it is a complete 180 to what we've heard before from the sec which is a very good sign but those guys are always behind regulators are always and they have to play catch up in this case as well even more so than they've done in the traditional world and i have two questions so the first is what makes your key management solution from more secure or user-friendly compared to competitors like my second question is have a wide list of licensed custodians that are using your bulk technology or is it maybe treating gases question number two i can tell you right

there are about 9 653 mbas wrapped around it so i'm not going to give you an answer on that one but you'll hear about it pretty soon um the first question fire blocks and copper the everlasting competition um there is a lot of stuff that we do the same way which is good thank god that there is not just one um we lost curve which is sad to a certain extent but uh in terms of like access and what he can do from them from from a ui ux perspective and how you can interact there is a lot of similarities when it comes to the custodial bit we are vastly different never mind you know add-on products like clear loop which i think that built something um i think i think you're built number right

but uh um then you have to play some catch up there but what it basically comes down to is the fact that you have um that you have the core question coming back to where does your key material sit and i'm not going to go into details because it wouldn't be fair of like how you can be in a position of having to you know have to explain of how assets for example can be lost now the way that we are positioned differently and this is why i'm urging people to ask that question which is maybe going to you know increase change is the fact of like figuring out that if you have operation anything happening on the custodial level are you asset safe that's the core question

if copper disappears tomorrow or myself and and demo or my business partners lose their and we're deleting everything that is available you still need to be able to have access to your funds and as long as this question is being answered clearly you have your answer very very very simple those are those are the differences in many other ways absolutely great technology solution both solving certain problems extremely well five blocks is emitting on the settlement layer amazing where we have been focusing more on the custodial layer with interaction to exchanges that's one of the differences but that's where you need to kind of ask those questions that's why you know

we're all here so questions asked hopefully you get the answers i'm not a technical person so forgive me if this is an overly basic question but can you explain at a conceptual level how mpc is different from a two of three multisig wallet in terms of security the multisig the multistick in its and it's in its basic form has a private key that has been existence right so the so the approach base in terms of creating this segregated key material is not re-engineerable but it is it is not as secure as the empty part based on zero notches this is where you would need to go into the like like lindor basically wrote this out quite nicely i would highly

suggest that you reach this because that would be the whole hour by itself and i'm not the right guy talking around photography bottom line cryptographically speaking npc is more secure than to africa yes in my opinion i think sorry oh there you go please he answers the questions segregated instances as well so that's fine and uh it's actually harder to do so i do have two or three questions please don't ask me questions please don't do specific like things like pressure signatures

eventually it's about generating yeah so there are each so there are specific signature methodologies that you need to support for different chains right so so you do have like ecbs a threshold yes yes um and how do you do the key set because that's what i didn't understand and that's crucial you need to set up key material already in a distributed way obviously right because otherwise give me a point of how you do that like what protocol you're based

on like in terms of in terms of the actual creation during the actual wallet creation using using my god can i can can i catch i thought nobody was supposed to like cryptographics no no no no this is just a joke what i would highly suggest is that we have a chat later and i'm going to put you in touch with jake who's our chief information security officer they can answer you all those questions that you have in much better ways than i could ever do okay good questions please please please come thank you that depends right uh on the pure custodial side we're

currently charging as a standard rate two and a half tips per month um we're not doing withdrawals and deposits so we don't do movements because we take the more custodial approach um and then it depends what kind of service level you go and talk you take wolf garden you take detail you take staking you take but it's based on auc not on movements um how often do you refresh the clear loop uh balance with the exchanges

for example realized [Music] your your trading is still that is very important you don't trade through us so you still trade with the venue directly whatever you see on screen is what you have it's just the collateral and ultimately your margin balance that just sits at a third party that's the difference in terms of updating we are being prompted for example it depends from exchange to exchange um on average what you're doing is uh as soon as you realize the p l the settlement instructions being issued depending on what kind of instrument you

trade you can have eight hour cycles where you basically just rebound but but it it varies from exchange to exchange so in theory you have an eight hour credit risk against the exchange for the movement on that you have you have a you have a um the movement in terms of you being liquidated for example if this is what you're talking about well the important part is that the exchange balance is good so it should be covered even the marketing market the market market should be covered but it depends i mean in case that in case that uh you have i mean we're talking about those extreme corner cases right so totally comes out

there's this is just a hoax everything's not true and the whole thing is just going down i mean there are there are some quite significant problems that you need to face and there would be a scramble i'm not saying that we are in any shape or form ever right now at least the ccp in this instance which we're looking at but what you basically have is the dispute is still between you and the venue director that's the way that it is right now but we are thinking along those lines do you want to think one more question one more run out of time please just back to the best position yourself the training partners the exchange and

the entity are dealing directly with one another but they're trusting you to keep balance uh and i would guess that both parties are buying some of your risk as well of being able to do your job so your balance sheet is somehow also relevant to the overall question not a startup anymore but we are still sort of starting size because for large institutions you might not be big enough to actually be party to that constellation i am i'm like in terms of like a balance sheet exercise i can tell you that our balance sheet is pretty good it's solid but i understand where you're

coming from um the question is in terms of like us carrying additional risk because the collateral now sits with us instead of with the exchanges right now in this case first and foremost you talk about segregation what i haven't mentioned yet is the way that we built this is every single volt that you see every single volt that you have is fully segregated within the infrastructure on the blockchain analysis which means that from a counterparty risk perspective if something horrible happens to copper in this instance that's let's take this approach like i said earlier your assets are untouched which is extremely crucial so the segregation part is the key piece if you have an omnibus infrastructure like most of the

exchanges do you have a massive problem because if something goes wrong there you're on the hook but this is why i say limiting and mitigating central points of risk is the whole that's the whole exercise here that's why we get those questions i'm happy to share a legal opinion with you as well i'm gonna cook that basically says in terms of operational counterparty risk in terms of that you take on with topper because of your assets sitting there instead of the exchanges you don't have