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Coinbase is launching a multi-signature vault service, finally giving security conscious users an option to control their own private keys and therefore, their own funds.
Coinbase has been called the “Paypal of the Bitcoin world” as both a compliment for its ease of use and as a criticism, for the lack of control users have over their private keys and funds.
Today, Coinbase is taking a step to address that issue with its new MultiVault system. They made the announcement moments ago on their official blog:
“Our new multisig vault gives the customer complete control of their own private keys. Coinbase has no ability to move funds (which means you are safe from Coinbase being hacked, going bankrupt, or anyone seizing your bitcoin). It also means that you as a customer have much greater responsibility in storing your backup key securely. If you lose this backup, Coinbase cannot help you recover your bitcoin. For this reason, we only recommend this feature for advanced users.”
Coinbase has had its “vault” feature for several weeks now, but until today, users lacked the ability to keep control of their funds, outside of printing a paper wallet or moving it out of the Coinbase system.
When making a new vault for secure storage, users will be given the option of having Coinbase secure their funds or securing it themselves using the multi-signature system. The default is set to a 2 of 3 system, with Coinbase controlling one key, the user controlling the other and a third key is stored, fully encrypted, in Coinbase's servers.
That does mean that there is enough stored on Coinbase's servers to steal your Bitcoin. The encrypted key is protected by a user created password. If that password is leaked to a nefarious party, they only need either the user key or the Coinbase key to steal your funds. However, with the key fully encrypted and secured with a strong password, things are a lot more secure than a single private key held by Coinbase or the user.
Not insignificantly, using your own key and the encrypted key, it is possible for users to send their Bitcoin using their key and the encrypted key, without going through Coinbase at all. They also released an open source tool built to recover lost wallets if Coinbase ever goes offline.
The system also allows for 3 of 5 multi wallets, allowing users to give keys to family members or other trusted parties. This can be useful in allowing family members to access your funds after your death.
Coinbase's MultiVault system is free of charge and is available to all Coinbase users starting today.
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