A New Choice for On-Chain Asset Management: Enhanced Multi-Signature Wallet Solution

As the cryptocurrency market enters a downturn, the focus of hacking attacks has shifted from on-chain protocols to personal wallets. At the same time, the strong interest rate hike cycle has led to a significant withdrawal of liquidity, causing the collapse of several centralized institutions, severely damaging user assets. Recently, security incidents have occurred frequently, with asset theft events emerging one after another, making it particularly important to ensure the safety of one's assets. More and more people are starting to pay attention to decentralized security asset management solutions.

The Importance of Having Control Over Your Assets

For a long time, many users have chosen to use the services of centralized institutions to enter the cryptocurrency space due to operational convenience. However, there is a famous saying in the blockchain world: "Not your keys, not your coins" (only by controlling the private keys can one truly control their assets). Users opt for centralized institutions for convenience, but at the same time sacrifice a certain level of security. Once a centralized institution encounters problems, user assets will face significant risks.

Taking a recent incident on a certain trading platform as an example, the platform misappropriated user assets, resulting in a shortfall of nearly $6 billion. As risks spread, other related centralized institutions also began to experience problems. It is estimated that there are up to a million victims globally from this incident. If users had learned to manage their assets using their private keys from the beginning and stored most of their assets in decentralized facilities (such as hardware wallets, Multi-signature Wallets, etc.), they could have greatly avoided such losses.

However, managing private keys is not an easy task, involving security measures and best practices for the generation, storage, management, and use of private keys.

In September 2022, a well-known market-making institution suffered a loss of nearly $160 million due to the use of a flawed private key generation tool, which led to the leakage of the owner private key for relevant contracts. In November of the same year, a well-known investor's Wallet was also attacked by hackers, resulting in losses of up to $42 million. Investigations revealed that the core issue was the leakage of the wallet mnemonic phrase used by the user.

These events indicate that private key management is a complex task. However, in the current environment, using services from centralized institutions presents a significant trust crisis. So, is there a way to securely manage one's assets without worrying about a single private key leak leading to the loss of all assets?

Mature Multi-signature Wallet Solutions

Due to Ethereum's account structure not supporting multi-signature mode, users cannot directly create multi-sign addresses like in Bitcoin. However, Ethereum supports complex logic through smart contracts, so it is possible to write smart contracts to create on-chain Multi-signature Wallets. It is important to note that the smart contracts themselves may also have security risks, and attacks targeting contract vulnerabilities have been common in history. Therefore, when choosing a Multi-signature Wallet, it is essential to use solutions that have been audited multiple times and validated over a long period. A well-known Multi-signature Wallet is undoubtedly a better choice.

By using this Multi-signature Wallet, users can custody their assets in a multi-signature contract and choose appropriate signing rules based on their needs. The assets in the Multi-signature Wallet are no longer managed by the private key of a single address, but instead are collaboratively managed by multiple addresses. Each transaction initiation requires signatures from multiple addresses and requires the total number of valid signatures to reach a preset threshold. This method can effectively eliminate the risk of total asset loss caused by the leakage of a single private key.

However, this Multi-signature Wallet has some shortcomings in terms of ease of use while enhancing asset security:

1. Each transaction requires multiple confirmations before execution, which is less efficient.
2. Does not support specific decentralized processing, wallet members have completely equal powers.
3. Specific risk control strategies for interactive contract configuration are not supported.

So, are there better multi-signature products that can address these shortcomings while maintaining the original security? A new type of enhanced multi-signature Wallet solution has emerged.

Flexible on-chain decentralization and risk control solutions

This new solution is based on the mature Multi-signature Wallet for secondary development, utilizing modular expansion features to achieve flexible customization of interactions between the Multi-signature Wallet and project contracts. Specifically, it can provide the following services:

Single-signature Rights

Supports function-level decentralized management, allowing different function interaction permissions to be configured for specific user roles. Simple configuration on the interface enables granting user roles the permission to call specific contracts and specific functions. For example, a role can be configured to only call a specific function of a specific contract, completing only specific operations.

Through this decentralized feature, specific transactions no longer require all multi-signature members to sign off individually; they can be successfully initiated with just the single-signature approval of an authorized user. This greatly enhances operational efficiency, and due to the restricted permissions, even if a single account encounters issues, it will not directly threaten the principal assets of the Multi-signature Wallet.

ACL Risk Control

In addition to the function granularity power distribution mechanism, a more granular ACL (Access Control List) contract risk control mechanism is also provided. Users can customize and formulate any power distribution and risk control rules based on business scenarios, such as:

• Limit the parameter range of user contract calls
• Limit the number of calls to a certain contract function
• Conduct risk checks on contract interactions

The source code of the contracts for these features has been open-sourced, allowing users or third parties to audit it to ensure there is no risk of centralized malicious behavior.

Conclusion

Recent security incidents remind us that there are certain risks associated with storing assets in centralized institutions or managing private keys independently. These risks are prompting various parties to seek better asset custody solutions.

The new decentralized custody solution expands upon the mature multi-signature wallet solutions in the industry, offering more flexible customizable features such as decentralization and ACL risk control, better balancing the conflict between asset security and wallet usability. It provides institutions and individuals with a new choice of capital management tools to navigate through the capital winter and embrace the next wave of prosperity.