Bitcoin Cold Storage System-U.S. based payments processing company, ‘Square’, has announced in an official blog post published on 23rd Oct. 2018, that it is open-sourcing its Bitcoin (BTC) cold storage solution. Alok Menghrajani stated in the blog post that the company has chosen to make the system open source. This is to inspire further innovation in the cryptocurrency space. And help amateur companies in the cryptocurrency industry fulfill their security needs.
Hardware Security Module
Square’s solution, entitled “Subzero,” uses a Hardware Security Module (HSM)-backed cold wallet called for which the company has now released the code, documentation, and tools, as mentioned in the blog post.
Menghrajani said that the benefit of using an HSM as opposed to other wallets. Because of its ability of HSM to create multiple security layers. Which tradeoff convenience based on the number of funds stored in each layer. He further added that the HSM is programmable, giving the firm the flexibility to implement other protocols in the future.
Bitcoin Cold Storage System-HSMs’ security benefits reportedly include robust protection against physical tampering, strong access control and the option to replicate keys for backup or recovery purposes, which Square says makes them a natural fit for crypto cold storage.
There is also multi-signature protection for its wallet, in which participants must use a combination of smart cards and passwords to authenticate transfers.
Square rolled out a Bitcoin trading app last year knows as ‘Cash App’. Cash App customers have the ability to buy, sell and withdraw Bitcoins. They can view the balance on their account. But the actual Bitcoins are held by Square in a combination of hot and cold wallets. Cold storage is a method of keeping cryptocurrency holdings and users’ private keys offline. In order to safeguard against theft via a remote attack. Meaning that the private keys for the wallet are stored in such a way that they are inaccessible from any network.
Storing Bitcoin in a cold wallet reduces the risk of remote attack. Without remote access, it is more difficult for an attacker to obtain the private keys. Which give access to the Bitcoin stored in the cold storage wallet. Transferring funds out of cold storage requires physical access to the private keys. Or else the device on which they are stored. On the other hand, an online or hot wallet is able to send funds at any time. Keeping a small number of funds in an online wallet and the majority of funds in cold wallets is a good way to get the best of both worlds.