New Multi-Signature, Multi-Institution Solution with Robust Controls for Collateral
- Multi-signature, multi-institution model in which no one person or organization is a single point of failure
- Cold storage, native smart contracts, and manual confirmation together adapt traditional structured finance security protocols to Bitcoin and Ethereum
- Borrowers cooperate to protect their own collateral by using their Ledger or Trezor hardware wallet along with Unchained Capital and a 3rd party key agent, Citadel SPV
AUSTIN, Texas–(BUSINESS WIRE)–Unchained Capital, a blockchain financial services company that lends cash to long-term cryptocurrency holders, has announced the first multi-institution, multi-signature collaborative cold storage solution for the cryptocurrency lending industry.
Other crypto loan providers require the borrower to forfeit complete control of their assets and store collateral with a single party such as an exchange. When crypto-backed loans are protected by a single-party, the counterparty risk for both borrowers and lending capital providers is much higher. If that single-party refuses to honor transactions, goes offline, or absconds with funds, neither borrower nor lender can hope to recover the collateral. Exchanges are also huge, centralized targets for attackers which further increases risk.
Multi-institution custody protocols are the next evolution in crypto security, designed for individuals and institutions with large holdings who demand institutional-grade capital controls for their transactions and want to eliminate centralized & counterparty risks as much as possible.
Multi-Institution Custody Solution
While it’s true that the most capable crypto exchanges today internally use multi-signature protocols for protecting assets, these protocols are still subject to both risks above. Only multi-institution protocols, which separate keys across collaborating parties with different physical & operational security and incentives, can reduce these risks.
Unchained Capital’s multi-institution custody solution enables borrowers to distribute trust across three different parties: themselves, Unchained Capital, and a 3rd-party key agent. Each party holds one key, and two of the three keys are always required to authorize a transaction (2-of-3 multisig). This greatly reduces the pooled risk of attack inherent in using exchanges.
Other crypto loan providers also use hot wallets which commingle borrowers’ funds and further expose them to the threat of loss. Unchained Capital’s solution is completely cold and does not commingle funds: borrowers receive dedicated on-chain addresses for their funds and must use hardware wallets (such as Trezor and Ledger) to collaboratively authorize transactions on Unchained Capital’s website. This requirement encourages borrowers still reliant on exchanges or hot wallets to increase their own level of security when they obtain liquidity through Unchained.
Reducing Centralized & Counterparty Risk in Cryptocurrency Lending
Unchained Capital has partnered with Citadel SPV, an independent third-party administrator that brings 25 years of complex governance and financing experience to Unchained Capital’s lending offering. Unchained Capital and Citadel SPV have together implemented protocols for signing transactions, key recovery, and borrower remediation. Both companies adhere to a strict operating procedure for seeds, keys, and signers, so an unfortunate security incident at either institution would not compromise the overall security of the three-party custody solution, unlike the hack of an exchange.
Since borrowers also have a key in this multi-institution solution, risk is more distributed than at a single, centralized exchange. If either Unchained Capital or Citadel SPV were to disappear or be physically unable to sign transactions, borrowers and the remaining party can collaborate to restore any funds.
Powerful Security Preserves Wealth
By bringing multi-institution custody to the lending industry and reducing these risks, Unchained Capital will increase the confidence of lending capital providers thereby lowering rates for borrowers.
“As other, more traditional financial service providers start to include cryptocurrency in their offerings, Unchained Capital’s multi-institution custody solution will become the new standard for large, complex transactions,” said Joe Kelly, CEO, Unchained Capital. “Our custody solution is the foundation not only for safer loans, but many other classes of financial products as well.”
About Citadel SPV
Citadel SPV is an independent third-party provider of governance, administration and accounting solutions to the global capital markets. Founded in 2014 by a team of professionals with more than 25 years of industry experience in an array of disciplines including legal, accounting, securities services and capital markets finance, Citadel SPV leverages its unique capabilities to deliver customized solutions to its clients and their advisors. www.citadelspv.com
About Unchained Capital
Unchained Capital is a new kind of blockchain financial services company. We offer cash loans to long-term cryptocurrency holders in a secure, fast, and transparent manner, backed by our multi-signature, multi-institution cold storage custody solution. You shouldn’t have to pay membership fees or buy a new token to start leveraging your crypto assets as collateral — and you certainly shouldn’t feel less safe. We can fund loans up to $1M in one business day, and loans over $5M in just a few weeks. Come and get a quote today, with interest rates starting as low as 5.99%: www.unchained-capital.com