Increased security has played a critical role in the cryptocurrency space in 2019. The current state of the market has dictated a stronger need for more secure transactions. The need to have improved safeguards is critical. There is much diversity in the solutions offered, from smart wallets to safer contracts. However, when it comes to security, there needs to be an overarching philosophy around conducting crypto-transactions.
The legal framework in cryptocurrency space
"So far, the global legal and regulatory response to cryptocurrencies has been fragmented with a patchwork of uncoordinated initiatives developing in different jurisdictions. In the US and Asian markets, legislative action has already been taken or is underway. There is the potential in the EU, Australia, and Canada for market participants that act as gateways between conventional currencies and cryptocurrencies, such as exchange platforms, to be declared subject to anti-money laundering and counterterrorist financing (AML and CTF) requirements. In other regions, activities related to cryptocurrencies may be prohibited or are otherwise heavily restricted.
As a general rule, where no specific steps have been taken to regulate cryptocurrencies in the relevant jurisdiction, it would be necessary to refer to the existing legal and regulatory frameworks to understand how they might apply to the new circumstances that the technology enables" - Nortonrosefulbright
Quadriga’s story shook cryptocurrency investors in the volatile and budding marketplace to their core. Many onlookers have been left wondering how such a disaster was allowed to unfold in a developed country like Canada. Canada still has no official rules that would prevent a future Quadriga scenario where tens of millions in client funds could be stored on a personal laptop, without any supervising body or backup strategy.
Under Canadian law, digital currencies are permitted, but cryptocurrencies are not considered legal tender. Many regulators also do not consider Ether, Bitcoin, Bitcoin Cash, Ripple, or Litecoin as securities.
Quadriga notably operated across jurisdictions. The exchange was registered in British Columbia, but had no offices in the province, in fact, no offices at all. It was run off its CEO, Geral Cotten’s laptop, who was based out of Nova Scotia.
The consequences of lack of legal framework. QuadrigaCX.
QuadrigaCX is a Canadian company that is registered and located in Vancouver, British Columbia, Canada. The site claims to be the largest Canadian cryptocurrency exchange and while it does not generate trading volumes comparable to the industry’s leading exchanges it is a significant player in the Canadian market.
However, QuadrigaCX is not regulated, and while the Canadian Securities Administration (CSA) has noted that ICOs, cryptocurrencies, and all related trading and marketplace operations may be subject to local securities laws, no enforcement measures have yet been taken. The exchange is operating legally although the website doesn’t contain any information on the founders, team, or when the platform launched.
As a result, at least 26,500 Bitcoins, 430,000 Ether, 11,000 Bitcoin Cash, and 200,000 Litecoin have disappeared forever.
This was due to the death of a cryptocurrency exchanges founder, who was the only person to know the private keys for the “cold wallets” used to store the exchanges various cryptocurrencies.
QuadrigaCX is one of Canada’s largest cryptocurrency exchanges and it is estimated that the dollar value of the lost cryptocurrencies is at around $147 Million.
Other reports put an estimate at over $250 million for the assets owed by QuadrigaCX to its customers.
Security of crypto wallets
One of Bitcoin’s greatest features is also one of its most dangerous. The ability to have complete control of your assets without depending on a third party brings with it considerable risk. With cryptocurrency, your private key is everything. Lose it and you lose access to your all your coins, and whoever finds it gets full access. For people using certain software wallets and hardware wallets like a Ledger or Trezor, the private key is accessible through a 12–24 word seed phrase that serves as a recovery key. As this seed phrase serves as a master key that grants full access to the private key, it needs to be backed up securely and protected at all costs. When setting up your software or hardware wallet for the first time, recording the recovery seed phrase and keeping it safe is an extremely important part of using Bitcoin and other cryptocurrencies, as not doing this can result in the loss of all your coins.
According to Noozzle wallet, you will be able to recover it with the seed phrase also. Writing the seed phrase down on paper is often a recommended option and is preferable to recording it electronically or online where it is at risk to hardware failure and hacking. Obviously, paper is not the most durable material and is susceptible to damage by fire, water, and any number of other elements. Engraving the recovery seed on a metal plate solves this issue and gives the key more durability and permanency. You will still need to be diligent in keeping the metal plate secure which may mean keeping it in a safe, safety deposit box, or somewhere well hidden.
Benefits of metal plate wallets
1. Offline: safe from hardware failure, no third-party trust required, safe from online hackers
2. Rugged and Durable: fireproof, waterproof, rust and corrosion resistant (for stainless steel and titanium plates)
3. Transferable: can be given to your loved ones or heirs, your coins are always recoverable with the seed key.
If Nozzle Team will offer to secure your mobile seed phrase on a similar plate, would you be interested? Feel free to comment on that in our telegram live chat and other social media channels.
Types of metal plate wallet
Cryptosteel Stainless Steel Bitcoin Crypto WalletCryptosteel is a highly rated metal wallet made of 100% stainless AISI 304 steel. Cryptosteel is the best option for those who want the easiest to use and most hassle-free metal seed wallet. Its rugged features include being fireproof up to 1200°C (2100°F), waterproof, and shockproof. It is double-sided and holds 12 words per side. It actually holds only the first four letters of each word but that is all you need for the BIP39 specification. The wallet comes with metal letter tiles that slide securely into the wallet for an easy method to record your seed phrase. When in its closed position, the wallet has a hole that can accommodate a padlock or anti-tampering tag (just keep in mind a padlock can be easily picked or cut off). The Cryptosteel website offers several versions for other forms of private keys and passwords.
ColdTi Titanium Metal Crypto Seed Storage Wallet The ColdTi titanium wallet is a more affordable alternative for a metal seed storage wallet. Like titanium, it has a higher melting point than stainless steel in excess of 1650°C (3000°F) and it is rust proof. It includes two titanium plates (with space for 24 words each) as well as two binding post sets and uniquely numbered holographic stickers to seal the wallet and provide a tampering indicator. The downside to this wallet is that it’s not as easy to use as the Cryptosteel, as you need to engrave or stamp the seed words into the titanium plates. Buyers have reported that the wallet includes numerical stamp tools but not letter stamp tools, so to record a recovery phrase you will need to convert your seed words to numbers, which you can do here. Or you can buy letter stamps or an engraving tool separately.
Blockplate Stainless Steel Recovery Seed WalletThe Blockplate is a simple ANSI 304 stainless steel option that includes two plates that can record 12 recovery words each (6 words per side). Rather than using number or letter stamping bits, the Blockplate uses a single center punch tool to indicate the order of the letters (labeled on the plate) for each word. For an additional layer of protection, you can keep each plate with half of the seed phrase in separate locations. Thus, if one plate is compromised it can’t be used to recover your private key without the other plate.
Billfodl Stainless Steel Crypto Private Key BackupThe Billfodl has the same stainless steel design as the Cryptosteel. One of the advantages of the Billfodl is that it comes with more tiles than the basic Cryptosteel MNEMONIC model which only comes with capital letters. The Billfodl includes over 350 tiles with capital and lowercase letters, numbers, and blanks. This allows it to support alphanumeric or hexadecimal keys in addition to the 12–24-word seed phrase. It is made of 316 stainless steel versus the more common 304 types seen in other metal storage wallets. 316 stainless steel is more corrosion resistant against chlorides like seawater. Billfodl also sells accessories on its website like the Fodl Hodler hiding mount and tamper-proof stickers.
Safe Seed Copper Metal Recovery Seed WalletThe Safe Seed metal wallet is an all-in-one solution with a mid-range price that includes two copper plates and stamping tools to record your recovery seed phrase. Copper has a slightly lower melting point than stainless steel and will not rust, so it’s probably a decent option.
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