Author: Praveen Baratam 2019-08-05 15:36:49
Published on: 2019-08-05T15:36:49+00:00
Dr. Praveen Baratam is the inventor of CoinVault, a second layer protocol and technology that aims to make Bitcoin and other similar altcoins "unstealable and unlosable" for all practical purposes. Praveen was introduced to Bitcoin by a friend in 2017 during which time Bitcoin Cash's block size debate was ongoing and there were several hacks affecting various cryptocurrency exchanges across the world.Praveen and his team set out to create a safer way to store cryptocurrencies both for individuals and enterprises. After nearly two years of brainstorming and toiling, they have come up with CoinVault, a second layer technology that can ensure the safety and security of Bitcoin and other cryptocurrencies for both large and small entities.Cryptocurrency exchanges act as custodial escrow agents for the trading entities participating on their platforms to minimize counterparty risk and guarantee settlement. However, this escrow mechanism creates a new problem of keeping third party funds/tokens in their custody safe and secure since any security breach on the respective Cryptocurrency Exchanges' systems can compromise the private-keys securing the funds.In the proposed scheme/arrangement, a Cryptocurrency Exchange can enforce settlement albeit with a predefined delay and does not need exclusive custody of the said funds/tokens beforehand to guarantee settlement. Moreover, in the event of a security breach on one or both sides, there are remedial steps that the Cryptocurrency Exchange and/or First Party can take to prevent loss or theft of respective funds/tokens.The solution is a transaction method between two parties (First Party and Second Party where the Second Party is acting as a secure Cryptocurrency Exchange and/or Wallet for the First Party) participating in a cryptocurrency network/system to reduce the probability of loss or theft of the First Party's funds/tokens while guaranteeing settlement between trading/transacting parties by the Second Party.The method presumes that unrecoverable hardware wallets and time-locks for transaction outputs are available for the cryptocurrency system of interest. The method and arrangement proceed as follows: At inception, the First Party creates a Deposit Transaction, in which the First Party transfers an arbitrary sum of funds/tokens in its control to a multi-signature address but does not yet sign or broadcast it.The multi-signature address in the Deposit Transaction requires the following signatures to authenticate and spend/transfer from it: First Party's Private Key generated Signature, First Party's Hardware Token generated Signature, and Second Party's Private Key generated Signature. Then, the First Party creates a second transaction, Provisional Transaction, spending all the funds/tokens sent to the multi-signature address in the Deposit Transaction and sends a copy of the Provisional Transaction without any signed inputs or signatures to the Second Party.Once the Deposit Transaction is confirmed, both First Party and Second Party start monitoring the Cryptocurrency network using third-party services for transactions referencing the Multi-Signature output address described above from the Deposit Transaction to detect any breach of security or foul play.Subsequently, the First Party, at its discretion, can add its Private Key generated signature and the signature generated by the hardware token in its possession to the partially signed Provisional Transaction with the Second Party's Private Key generated signature and broadcast the fully signed Provisional Transaction to the Cryptocurrency network/system when necessary.Similarly, the Second Party can add its Private Key generated signature to the partially signed Provisional Transaction with the First Party's Private Key generated signature and the signature generated by the hardware token in possession of the First Party and broadcast the fully signed Provisional Transaction to the Cryptocurrency network/system when necessary. Either party can add missing signatures to the partially signed Provisional Transaction in their possession and broadcast them when necessary.As soon as the Provisional Transaction is broadcasted, the Cryptocurrency monitoring systems prompt both parties to initiate recovery if it is not broadcasted by them to begin with. Either way, First Party or the Second Party in coordination with the other or optionally unilaterally create and broadcast a transaction using the respective options of the Provisional Transaction transferring the funds/tokens to a desired address terminating the arrangement.The method of securing cryptocurrency exchange transactions can be extended to cover the contingency of lost private keys by reordering, adding or removing options in the Provisional Transaction. The Second Party gets first claim on funds/tokens but cannot steal from First Party since this would result in loss of trust and legal proceedings. If First Party and/or Second Party are compromised, remedial steps can be taken to reconcile the situation. Even if Hardware Tokens are not available, relative/absolute timelocks can still offer better protection than multi-signature arrangements.
Updated on: 2023-06-13T20:46:54.401113+00:00