Digital Asset Self-Custody With Smart Contracts and Vault Storage
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Conventional digital asset storage systems rely on custodians, leading to legal delays, risks of asset loss, and pooling of assets, which complicates secure storage and access for users.
Innovation Solution
A system that allows users to securely self-deposit and store digital assets using a processor-based platform with modules for initiation, verification, smart contracts, and vault storage, ensuring user ownership and easy access without a custodian role.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If a custodian is used to oversee digital asset storage and retrieval, then legal requirements are met and contracts can be executed, but this results in delays in data storage and creates risks of asset loss or bankruptcy
Solution Approach 1:
The system enables users to self-custody their digital assets through automated smart contracts and multi-signature verification mechanisms. The multi-sig wallet requires multiple authorized parties (including the user) to approve transactions, eliminating the need for a single custodian while maintaining security. This self-service approach removes custodian-related delays and legal requirements while preserving asset protection through cryptographic verification and distributed authorization.
2Productivity
If digital assets are pooled together from multiple entities like a bank, then storage efficiency is improved, but this generates further risks and delays for the party requiring storage
Solution Approach 1:
The system segments digital assets into individual user-controlled wallets rather than pooling them together. Each user maintains separate ownership through their own multi-signature wallet, eliminating the risks associated with pooled storage such as counterparty risk and centralized failure points. The segmentation is achieved through blockchain-based address management where each user's assets remain distinct and independently secured by their own key pairs and authorization mechanisms.
3Adaptability or versatility
If a custodian role is implemented in digital asset storage systems, then legal requirements are satisfied, but this complicates the system and creates potential points of failure
Solution Approach 1:
The system replaces the mechanical/legal custodian structure with cryptographic mechanisms. Instead of relying on legal contracts and custodian oversight, the system uses digital signatures, public-key cryptography, and smart contracts to enforce ownership and transaction authorization. This substitution eliminates the need for custodians while maintaining security through mathematical proofs of ownership and automated execution of transfer conditions on the blockchain.
Data Source
Figure 1
Figure 2
Figure 3
AI summary
Systems for securely self-depositing and storing digital assets. One such system may include a processor disposed in connection with a memory having computer-readable instructions stored thereon and configured to execute a storage system. The storage system itself may comprise an initiation module, a verification module, a bailee module, a contracting module, a vault module, and a withdrawal module. The verification module may comprise a whitelisting submodule. The processor may be configured to execute a storage system via a software application configured to be executed on a memory of a client device, the software application operative to: register a user; verify the identity of the user; receive at least one digital asset; execute at least one smart contract between the user and the custodian; store the at least one digital asset according to the at least one smart contract; and return the at least one digital asset to the user.