Amid the rapid adoption of multi-signature technology by industry players, Gem is going from strength to strength, partnering with several high-profile cryptocurrency service providers who have learnt from the mistakes of the past.
These mistakes are addressed by exchanges, wallet providers, payment processors, and others in the ecosystem migrating away from custodial models to noncustodial 2-of-3 multi-signature models, where hackers gaining access to a single online key cannot do anything with that key.
“All digital coins should be stored on wallets with multi-signature keys,” explained the CEO of LazyCoins to CoinTelegraph, Danial Daychopan. “By requiring multiple individuals to authorize transactions, you eliminate single points of failure.” He added:
“Because no one person can ever access the wallet, you greatly reduce the risk of theft from hackers or internal fraud.”
Ethereum’s Founder, Vitalik Buterin called multi-sig “the future of Bitcoin” back in March of last year and that future appears to be quickly approaching as many security solution providers such as Gem have been trying to hone the technology.
Gem Secures Cryptosigma, Expresscoin
Since its unveiling in September, the company has signed with both Cryptosigma and Expresscoin among others, both of whom wish to offer workable wallets for everyday consumers without the threat of security breaches being a mere step away.
“From the very beginning, we wanted Gem to empower digital currency companies to focus on building great user experiences, instead of focusing on infrastructure,” Gem’s CEO and founder Micah Winkelspecht said in a press release regarding the Expresscoin deal.
The increasing popularity of multi-signature bitcoin transactions is illustrated in this chart from BitGo:
Security issues directly affecting the average cryptocurrency user have come to the fore again recently. In 2015, amid continually growing knowledge of Bitcoin in particular, it is not just the Mt. Gox scandal which remains as a distant warning to heed, but the serious compromises at Bitstamp and several smaller exchanges as well as popular digital wallet providers. All these give the competition increasing cause for concern, and even the most confident developers are now looking to ensure complete security at any cost.
Gem entered the scene at an ideal time, and multi-sig security is being seen as the new standard for digital wallets; an industry best practice.
“The beauty of multi-sig is that when implemented appropriately, it actually provides much better security than the historical custodial account model,” Gem’s new COO, ex-PayPal executive Ken Miller told CoinTelegraph. “With multi-sig, instances like Mt. Gox would never happen.”
Miller was speaking within the context of the Cryptosigma partnership, which will see Cryptosigma launch with Gem’s wallet technology. Cryptosigma Founder and CEO, Aaron Siwoku, explained to CoinTelegraph in an exclusive interview :
“When we see the migration of exchanges […] to the implementation of non-custodial user wallets, [coupled] with the implementation of multi-sig wallets, […] over time we will see a mind-numbing reduction in the percentage of wallet funds that are compromised each year.”
Cryptosigma will use an operational wallet from Gem that uses multi-signature transaction signing. This means that if the hot wallet is compromised, it will be very easy to stop signing transactions and move the funds without having to take the exchange offline for a few days while the platform is secured as we recently saw with a popular European exchange, which learned to implement multi-sig security the hard way.
Similarly, Expresscoin has also unveiled a two-step integration plan, firstly involving use of Gem’s API in its internal operations, with a full Gem wallet being made available to customers later on.
“Gem’s cutting-edge platform offers our customers the security and flexibility they desire and allows us to focus on providing a superior service,” Will Wheeler, CEO of the Santa Monica-based exchange, said in the Gem press release, adding that Expresscoin’s “number one priority” was “keeping our customers’ funds safe while allowing them full control and manageability of their coins.”
The New Security Standard
Gem’s technology has garnered enthusiasm since its launch due to its ability to combine a suitable level of security with the all-important “resonance with users,” as Miller puts it, which is so vital to the success of wallets with the mainstream.
“2014 was a monumental year for legitimizing bitcoin as a currency,” Miller continues. “2015 should be the year it becomes mainstream; however, crucial to its wide adoption and advancement is trust in its security, and we’re excited to provide that security to expresscoin and all other apps and services.”
Of course, multi-sig security is still a work in progress and cannot solve all of Bitcoin’s security issues in one fell swoop. But keep in mind that if the only thing separating your coins from a hacker is a single private key, especially one controlled by a third party, then your account will be the preferred target compared to one that requires multiple actors to unlock the funds. Using a single-key model might very well become the equivalent of drawing a target on one’s back for hackers since their job becomes much easier.
Thus, it is no surprise that multi-sig security is starting to establish a firm footing in the cryptospace and is on the fast track to becoming common practice and an industry standard. Danial Daychopan concludes:
“When digital currencies become part of mainstream business, multi-sig is likely to be one of the ways corporations prevent individual fraud and external theft.”
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