Why existing blockchain custody offerings are ‘invariably’ not secure – and what can be done about it

James is editor in chief of TechForge Media, with a passion for how technologies influence business and several Mobile World Congress events under his belt. James has interviewed a variety of leading figures in his career, from former Mafia boss Michael Franzese, to Steve Wozniak, and Jean Michel Jarre. James can be found tweeting at @James_T_Bourne.

Writing for Bitcoin.com in January, Tanzeel Akhtar explains that, according to research by the Bank of New York Mellon, there is ‘increasing demand in the market for a traditional, established custodian to provide secure storage of cryptocurrencies.’ “For many it is the bridge that will support institutional capital moving into the cryptocurrency market,” Akhtar added.

This need for an extra layer of reassurance – as the crypto markets begin to stabilise following a volatile 2018 – has led to startups forming around providing greater security. Lacero, with its FlowOS product, is one such example. On the eve of Blockchain Expo Global in London – at which Lacero is a sponsor – The Block caught up with Conner Nudd (left), product and UX lead at Lacero, to discuss the next wave of blockchain technologies, as well as the Achilles heel of institutional security.

The Block: Hi Conner. How did Lacero come into being and what was the inspiration for starting the company?

CN: Lacero’s founders came together from diverse backgrounds that collided to create the inspiration for Lacero.  Rashid [Hoosenally] spent 24 years in trading, and understands the type of robust security, control and compliance environment a well-run, regulated institution needs for successful operations and scaling. He also knows that getting the middle and back office right is essential to front-office success.

Stuart [Winter] and Yuri [Vizitei] have a combined 60 years’ experience in enterprise data security, encryption, distribution and sharding. They saw the potential for blockchain and smart contract technology to transform security, key management and control

TB: What differentiates FlowOS in your opinion from other solutions on the market?

CN: Most solutions that offer M of N consensus approvals do not provide the granularity of approval policy or compliance and governance tools that institutional users need.  Existing offerings are invariably not secure – they form a semi-secure layer on top of the blockchain rather than an inherent part of it.  Lacero’s FlowOS platform is the first that does, and the only one that has this level of functionality in an end-to-end secure blockchain architecture

TB: What have customers/investors been telling you about what they require/desire in a custody solution and why?

CN: Every firm is different, so they need flexibility and configurability.  They need speed, certainty, reliability and scalability.  They need to delegate tasks to multiple employees, but cannot fully delegate authority. Insiders have been the Achilles heel of security in many recent cases of loss and theft.  

Finally, they need autonomy and non-reliance.  They cannot ever be put in a position where they have critical dependencies or points of failure with any vendor or provider, whether in terms of people or technology

TB: In the same way that cloud computing initiatives have frequently required a further degree of management is this the next step for blockchain technologies in order to get past the ‘crypto winter’ and achieve mass adoption in your opinion?

CN: Absolutely – and we believe that improving solution quality means self-custody has to be an important part of the landscape.  We also believe that excessively bundled solutions will give way to specialised, modular ones.  Best-in-class solutions for each different aspect of the requirement set will be selected and put together 

TB: What are you looking forward to most at Blockchain Expo and what are you looking to get out of the event?

CN: Showing people what we can do!  We’re very excited by both our next-gen architecture and our completely unique feature set.  Because we are configurable and cost-effective, we think we can serve many different clients, from big to small, simple to complex.  We believe we can improve nearly any organisation’s existing arrangements

TB: What does the next 12 months hold for Lacero in terms of roadmap/strategy?

CN: We’d like the opportunity to prove that we can take any existing custodial arrangement and improve on it. Flow OS can be used either ‘instead of’ or ‘in addition to’.

We’re also very excited about the possibilities for GridHSM in large-scale deployments.  It’s a wonderful example of how blockchain technology can take something that already exists in the non-blockchain world and make it better in every way.  Anyone sceptical about the ability for blockchain thinking to solve real-world problems should come and see for themselves!

Interested in hearing more in person? Find out more at the Blockchain Expo World Series, Global, Europe and North America.

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