By Nick Marshall
Critics frequently point to the market volatility of crypto as a major weakness, but it may not even be the biggest problem facing investors. That’s because scammers stole $14 billion in cryptocurrency in 2021, and they’re redoubling their efforts each year. One way investors can protect their assets, aside from TransitNet’s off-chain title registry, is by using a crypto vault. Find out why a crypto vault goes further than a wallet in terms of security, and how to pick the right one for your assets.
What Is a Crypto Vault?
A crypto vault is a fortified version of the standard wallet you might use for your regular crypto transactions and storage. The big difference is that a vault offers additional security features. Typically, these include the ability to:
- Add a co-signatory (or signatories) to approve any withdrawal from the vault, so that there is an additional layer of authentication for each transaction.
- Impose a time limit for approval of each withdrawal, and a mandatory delay before funds are released.
These features combined make it much more difficult to remove assets from a cryptocurrency portfolio without clear authorization and cool-headed consideration. Not surprisingly, hackers and scammers despise crypto vaults.
How To Use a Crypto Vault
Adding crypto to your vault is as easy as crediting a wallet. Either share your unique vault address with a sender, or transfer cryptocurrency directly from your wallet to the vault. Withdrawing assets from a vault, however, is more difficult by design. Following your withdrawal request, a confirmation email will be sent to your primary and secondary email address. This has to be approved (typically within 24 hours) or the transaction is canceled. Once approval is given, it takes a further 48 hours before funds are released, providing an additional security “firebreak” for the vault owner, who can cancel the withdrawal at any time during this grace period.
Pros and Cons of Crypto Vaults
Crypto vaults impose deliberate friction on withdrawals to make the storage of assets safer. They’re great for investors who want to store their crypto assets and don’t need to withdraw them at short notice. There is also the benefit of receiving a notification that a withdrawal has been requested.
These benefits might become a disadvantage during market crashes like the one in May 2022. In that scenario, waiting 48 hours for assets to become available (probably for offloading) could be frustrating and costly. Likewise, when the market is booming, the slow pace of crypto vaults makes it harder to pounce with a quick trade.
What Makes Crypto Vaults Different?
The withdrawal delay and approval process are unique to crypto vaults, and there are some other subtle differences when compared to common crypto storage methods.
Vault vs. Cold Wallet
Like cold wallets, vaults are not connected to a network, so they are equally secure against hackers. Unlike hard wallets, however, there is no private key to access a vault, so there is no risk of losing access to your funds altogether if you lose your private key (or the drive itself).
Vault vs. Hot Wallet
Your assets are stored offline with a crypto vault, keeping them out of reach of hackers. That’s a big security upgrade on a hot wallet, which is vulnerable to hackers if they can obtain your private keys. Typically, investors will keep a trading balance online and transfer the rest to a cold wallet or vault for safekeeping.
Vault vs. Bitcoin Vault
Whereas Bitcoin Vault is an enhanced cryptocurrency that uses a 3-key security solution and allows withdrawals to be reversed within 24 hours, a crypto vault can be currency-agnostic. Some vaults are designed for a specific currency, while others (like Coinbase) support each of the different types of cryptocurrency.
How To Choose a Crypto Vault
Each of the exchanges offers its own crypto vault, and while the principle of each is the same, there are differences when it comes to:
- Approval layers: you can choose an individual or group vault, which in turn will affect how many other people need to approve a withdrawal.
- Security level: you’ll find a range of delay times and approval tiers to choose from between vaults, and some providers will allow you to customize yours.
- Fees: Coinbase is one of those providers who offers the vault at no extra cost (although transaction fees may apply for transfers and withdrawals). Other providers might charge a subscription or sign up fee.
- Registration: in some cases, vaults are available only to customers from certain countries. Check which restrictions apply to those vaults on your shortlist.
Ultimately, crypto vaults offer another valuable way to protect your assets. Combine secure storage with the industry’s first offchain title registry from TransitNet and you can put robust security in place to protect your assets, including a transparent way to prove ownership should the worst happen.
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