In May 2021, Nickel Digital Asset Management surveyed 50 wealth managers and 50 institutional investors across the U.S., U.K., France, Germany and the UAE to understand their concerns about investing in digital assets. The survey revealed that more than three-quarters of the respondents believed that “concerns about security of digital assets and custodial services [were] a ‘significant’ hurdle preventing many from investing in crypto assets for the first time.”
Security of crypto assets and trust in the overall markets are a serious concern. Bad actors negatively affect the development and acceptance of the crypto assets market. Each new 51%, phishing or routing attack or exposure of a new blockchain endpoint vulnerability makes the market seem a little more dangerous and a little less trustworthy
But it can also be argued that with each new attack the system as a whole becomes more secure because weaknesses are strengthened, practices improved and holes filled. It’s how the industry reacts to these attacks that is most important, not the attacks themselves. By learning from the mistakes, taking action and rebuilding better than before, the market increases trust and gains further mainstream acceptance.
One illustration of how this process has worked is with blockchain-based crypto asset platform YouHodler. In 2019, a report came out from vpnMentor that claimed a security breach in YouHodler’s systems affected 86 million clients. The report was wrong in every way – not least in that YouHodler didn’t have 86 million clients. Nevertheless, it was a learning experience for the company, which has become intensely focused on security since then.
YouHodler follows all the industry best practices for IT security checks, data protection, access rights and data encryption. It stores fiat funds in accounts at reputable banks in Europe and Switzerland and only partners with trusted fiat payment providers.
But that’s not enough. To make sure its security system is active and not passive, it conducts quarterly cybersecurity penetration tests and ongoing employee training for phishing and other hacks. Furthermore, YouHodler uses Ledger Vault’s industry-leading information technology infrastructure to securely control its crypto assets with a multi-authorization self-custody management solution and $150 million pooled crime insurance. All credit card operations are under PCI Security Standards, while all crypto operations are undertaken in accordance with the Cryptocurrency Security Standard (CCSS).
YouHodler has recently added a further layer of security by integrating its operations with Fireblocks, the leading digital asset custody and settlement platform. This gives YouHodler and its clients institutional-grade security for custody, settlement and additional corporate governance rules.
Having Fireblocks also increases the efficiency of interactions with other virtual asset service providers. Fireblocks’ network comprises over 400 participants and currently exceeds over $700 billion in transfer volume. Being a part of the network allows YouHodler to increase the efficiency of transactions with other counterparties including exchanges, brokers and wallets.
But the crypto market never sleeps, and every day brings something new. While all the major blockchains are already integrated into the YouHodler platform, with Fireblocks YouHodler can increase the speed and efficiency of integration of blockchains and protocols that are currently out of its ecosystem.
Security and trust in crypto need to be earned through a relentless focus on using cutting edge technology, to keep one step ahead of attackers. But it’s also about people. YouHodler is backed by real people who sit within the company and can act if anything goes wrong. It is not a DeFi platform, which by design has no central authority.
According to Ilya Volkov, the CEO of YouHodler, the principle behind YouHodler’s approach to security is to “not have all your eggs in one basket. Rather you should have as many baskets as possible … and lots of eggs.” This approach of building active, layered and segregated security systems will allow the crypto asset markets to gain the trust of new participants and grow to their next level of development.