Sep 15, 2023

A new non-custodial wallet-as-a-service is offering fintech and corporate clients from acting as custodians, in an effort to make it easier for end users to access DeFi and other Web3 apps.

Video transcript

A new non custodial has a wallet service offering hopes to free up big big fintech from acting as custodians in an effort to make it easier and for end users to access D I and other web three apps joining us now to discuss is co-founder and CEO of crypto custody, custody firm, fire blocks. Michael Shao, welcome Michael Lawrence. Thanks. So for having me good seeing you. So, all right, who's asking for wallet as a service, a non custodial wallet as a service? Why do they need it? Who's asking for it? How many, what's, what's your market here when, when you built this whole product? Who's your target market? So the reality is that pretty much everyone? Uh they are looking for that, to be honest, the the demand is actually coming from the end users, right? So on the back of what happened with FDX and Celsius and other entities uh last year, uh we've seen a lot of demand from end users to kind of get clarity on what is the control of their wallets and basically er get services like financial services, web three services and so on. But in a way where they have some visibility, transparency and um and, and control right over their assets. Uh I think, you know, it's uh it's pretty clear why that trend uh is uh is an important trend right to remove counter prior risk and uh as an effect, uh what we're basically we're seeing is that a lot of the fintech, the exchanges, the Neo Banks, a lot of the web three applications, right? And the way that they want to provide the service now is rather than taking custody of the assets, they want to basically use this uh uh non custodial setup in a way that uh they are able to differentiate themselves and uh and have it to their, to their end users. So II I guess my, my question here is this is that uh let's say on the institutional side, um why would somebody use a non custodial uh wallet versus say AAA custodian? Yeah. So uh when you say institutional, you mean uh basically a Fintech application or you refer to as matter, whatever it is, whatever it is, is it because you, because you said your market is broad, I am assuming that you have different use cases. So what who would use it and, and in that situation? So it's actually like, you know, pretty diverse across use cases. But the simple example is that if you're end user and you're using, you know, let's take the example from it that you were discussing earlier violence US, right? Um You're probably a bit concerned about the assets that you currently deploy now on, on B US. And there, there is an argument there that Binance Us should reduce the counterpart risk of their users to, to them and therefore them embedding, right? A non custodial wallet uh in their application and basically enabling you as the users to know that you have a control over the over, over your assets and actually know that your crypto is there and it's not being reaped, suffocated. It's not this, it's not going to disappear. You're not going to have an FTX like situation, it's critical, but simultaneously assuming that they are doing things correctly. They still need to apply the security, they need to apply uh the compliance. They need to apply the ability for them to recover your uh wallet in the case that you're, you, you're losing your phone or, or, or web access. And interestingly enough, the same argument applies to asset managers when they're interacting with a custodian, right? So as an asset manager, you, you, you not necessarily want to have to have the custodian, the full control over your funds and communicating those funds with other funds of other institutional uh deposits. All right. So the the wallets are non custodial, you just mentioned they can be recovered in the event of a mishap, explain how this works if there's any security risks for end users here. Yeah. So the main difference of our technology or basically what we are providing here, which is an M PC multiparty computation based non custodial wall as decay is that unlike a regular non custodial wallet that we're all familiar with like a leg nano or basically a, a pass wall that I can put on my phone. Er the entire private key is actually not sitting on the end device. It's basically split split between the mobile device or the web application, basically your browser, right, where you have part of the key share because of the multiparty computation, the M PC. And there is another part that is basically sitting on a back on back end services. And the part that is on the back end services, basically both parts need to uh agree together through a protocol that they're going to sign the transaction. But they never basically come together into one single private key. And the fact that there is a part, a private key part or what we call a share sitting on a back end service, it actually allows us to apply all the security controls, all the compliance controls and so on. So basically preventing your funds to go into an address that you didn't approve or interacting with a web, web three rock on a ad five protocol or interacting with the sanction entity, right? All those things, we can basically put the controls in place and even if your phone or your computer is compromised and you have a virus on it. Uh The hackers cannot manipulate those funds, right? And that's actually like, you know, the biggest and probably the most important achievement here in terms of what is being provided. All right, we got to um ask you fire blocks is a wallet provider for Fortress. Of course, we learned that Fortress experienced a fishing attack this week that led to $15 million in stolen funds were fire blocks as customers affected in any way. So fire blocks basically er been part of the infrastructure of fortress and as was reported by I believe you guys and the the root cause of the hack over there was basically that they were using um a web, a development application that was called R tool, right? So um retool basically was kind of the source of bridging the fortress infrastructure. I think luckily enough for Fortress, they did use our infrastructure that basically backstop the hack, right? And basically based on all the configurations and the policies that they configured into our infrastructure, the vast majority, basically 99% of the assets over there were unaffected and K that hack as a was specific to fortress. So as we mentioned, none of our uh customers were affected by that. And specifically, this is also like, you know, part of the ability of providing M PC based technology, whereas there is a full segregation er of the different um clients, right? And their security All right. And we also reported that Fire Blocks is working with HS BC, but the partnership has not been confirmed. Are you able to confirm that for us? Uh We, we don't have any comments on that. All right, Michael, we'll leave it there then. We hope you have a great weekend. Thanks so much for joining the show this morning. Thank you so much. That was Fire Blocks co-founder and Ceo Michael Solo.

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