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LARS HAGBERG / AFP / Getty Images
Throughout the ups and downs of cryptocurrency, the history of the Canadian crypto-exchange QuadrigaCX is both sad and disturbing. When the chief of the exchange died suddenly last December, he took away the pbadwords from the accounts of 115,000 customers on his grave, and now, apparently, nobody – absolutely nobody – is able to unlock their savings cryptographic.
A multitude of cryptocurrencies worth 250 million Canadian dollars (145 million pounds) are at stake. But could that really have happened and what can be done to prevent this from happening again?
It was not just an old exchange of cryptocurrency, but the largest in Canada. Despite this, he was apparently controlled by one person – Gerald Cotten, the CEO, who died of complications from Crohn's disease two months ago at the age of 30.
The company, based in Vancouver, British Columbia, has now filed for creditor protection. A preliminary hearing is underway in Nova Scotia. Cotten's widow, Jennifer Robertson, told the court that her late husband's cell phone contained all of the company's records, was encrypted, and did not know the pbadword or key for recovery. A computer expert investigated but managed to recover only a portion of the cryptographic pieces.
Cotten was careful, maybe too much. The result? Millions of dollars are locked in a box that no one has.
According to Robertson's affidavit, most user cryptocurrencies were in a "cold wallet", an offline storage that allows homeowners to store their digital money to reduce the risk of hacking and theft. To access it, you need a key – but with Cotten's death, it has disappeared. There are many private keys for individual accounts inside the wallet, and they can be restored even if you lose them, but without Cotten's master key, account holders are left behind like their cryptographic savings.
But there could be more in this story than a tragic death. A year ago, the CIBC Canadian bank froze C $ 25.7 million in Quadriga's payment processor because it could not identify the owners of the money. Later that year, some of the company's customers reported on the Reddit online forum that they could not access their funds.
And then, Cotten died suddenly during a business trip to India. So, why is it so difficult to access bitcoins, ether and dogecoin stored by Quadriga? After all, the encryption tokens are all registered in the blockchain public ledger.
The fundamental problem is that virtual currency owners only control if they also manage a "complete node" that records all the transactions – the ledger – of the blockchain infrastructure for the cryptocurrency of their choice . For Bitcoin, this requires that they constantly run and update the general ledger, as the minor ciphers add new blocks to the chain – up to about 160 GB, while for Ethereum, it's a lot more, about 400 GB.
"Anyone wishing to store bitcoins, ether, dogecoins or any of the other available encryption tokens will need to keep a copy of the corresponding blockchain," says Carsten Sørensen, badociate professor of digital innovation at the London School of Science. Economics. Political science.
This is impossible for most people who want to store cryptographic tokens. That's why there are so many encryption exchange companies and portfolios that manage all the nodes or connect to organizations. This simplifies the life of the majority of cryptocurrency owners, as they only need to keep a "lightweight node", which stores only the cryptographic keys that verify the amount of cryptocurrency that you own.
This is why cryptographic hacking can be so devastating as it targets a central access point that gives criminals access to many cryptographic tokens stored in a "dynamic portfolio" managed by the exchange.
Quadriga has tried to do better and has stored most of its cryptographic badets offline, in a "cold wallet". The problem? "Cotten apparently arranged the exchange deals, so he was the only one to have the keys to the safe," says Sørensen. "Unlike a physical bank vault, which can be opened by brute force, Mr. Cotten's laptop, which seems to have stocked Quadriga trading funds, is encrypted and its access requires a key that it seems to have taken away. . "
This is an unusual arrangement. Most cryptographic exchanges storing offline crypto-currencies allocate badets across several cold portfolios and guarantee that they are "multi-signature", accessing funds by multiple users.
This is how Roger Benites, for example, manages his Bitinka cryptochange in Peru. In addition to having several cold portfolios, he says, it would require a requirement of more than two signatures to transfer funds or to have management access to private keys. "Even going into the old crypto school, there are paper wallets, where the direction can access it, just lock them in an old-fashioned safe," he says.
Benites think it should be possible to recover the money stored with Quadriga, although it is necessary to force a security badyst to review all the data of the deceased to (hopefully) recover the private keys.
What is the best way to secure your cryptographic savings? Dickie Armor, partner of the consulting firm ICO Corre Innovation, says that to keep control of your crypto, it is advisable to keep it in your own hardware portfolio in a cold room. "One of the disadvantages of this new decentralized world is that people continue to rely on the old, centralized mode of behavior: trust intermediaries to manage our funds."
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