Controversial cryptocurrency exchange Bitfinex has announced a partnership with London-based crypto custody solutions provider Koine through which it will ensure more utility in post-trade faculties.
The partnership will enable a more robust custody solution for Bitfinex’s institutional clients given that the biggest gripe towards onboarding these professional clients has always been custody. Custody is so important in this market that it represents the biggest hurdle towards the introduction of an exchange-traded fund in the US.
“Koine’s unique security model, which deploys Digital AirlocksTM, replaces the cold storage and hot wallet model that can compromise the security of private keys as a result of still needing to be “eye-balled” by staff,” Bitfinex explained in a release on Wednesday.
“By combining this new digital asset security model with fiat custody and DvP settlement, Koine provides a post-trade solution that is suitable for traditional capital markets.”
Koine’s security solution is complex and befitting for a novel and equally complex digital asset. The firm’s founder, head of strategy and corporate development explains the Digital AirlocksTM solutions as follows:
“Digital assets enter an outer airlock which might conventionally be called a hot wallet but we refer to as a transit account, as the funds are only held there momentarily before moving to the second airlock when they are dematerialized onto a separate digital ledger and then transferred into a third airlock which is the vault for assets at rest.”
As imagined the outer airlock is the least safe and to counter any risk of losing funds held (momentarily) in this account, Koine has insured the account. It is worth noting that the funds held on this account only stay in this account for fractions of a second. However, at any given moment, there could be funds held in the account for a client either depositing or withdrawing. Despite this risk, the Koine solution is far superior to the conventional hot and cold storage in both convenience and security.
“We have always focused on building a service fit for institutional trading.” said Bitfinex CTO Paolo Ardoino adding that “In this collaboration with Koine for the delivery of custody post-trade infrastructure, we make another step on the path towards massive institutional participation in the crypto-trading market.”