Hybrid Digital Asset Private Key Custody for Conditional Recovery
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Solution Overview
Problem
Conventional digital wallet recovery services pose a security risk by having access to user private information, and there is no effective solution for recovering a lost or inaccessible private key without compromising security.
Innovation Solution
A hybrid custody system splits the private key into parts, with one part stored in a hosted wallet and the other in a smart contract on a blockchain, allowing recovery only under specified conditions, enhancing security by limiting access even if the password is lost or hacked.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If a user stores their private key in a self-custody digital wallet, then they maintain full control and security of their digital assets, but they risk permanent loss of access if the password or phrase is lost
Solution Approach 1:
The private key is divided into multiple parts (first portion stored in hosted wallet, second portion stored in smart contract). This segmentation allows the system to maintain security while enabling recovery through conditional access to segmented key components.
Solution Approach 2:
A smart contract acts as an intermediary between the user and the second portion of the private key. The smart contract holds the key portion and releases it only when predetermined conditions are met, serving as a mediator that enables recovery without compromising security.
2Ease of operation
If a recovery service provider is used to access lost private keys, then key recovery becomes possible, but security is compromised as the provider gains access to user private information
Solution Approach 1:
The private key is segmented so that no single entity (including recovery service providers) can access the complete key. The first portion is stored in the hosted wallet and the second portion in the smart contract, ensuring that even if a provider assists recovery, they cannot obtain full private key access.
Solution Approach 2:
The smart contract serves as an intermediary that automatically releases the second portion of the private key when conditions are met, eliminating the need for human recovery service providers to access private information. This automated intermediary process enables recovery without compromising user security.
3Ease of operation
If the entire private key is stored in a hosted wallet for easier access, then recovery becomes simpler, but security is reduced as the wallet provider has full access to the key
Solution Approach 1:
The private key is divided into two portions stored in different locations: the first portion in the hosted wallet and the second portion in the smart contract. This segmentation provides a balance between accessibility (hosted wallet) and security (distributed storage), allowing the system to achieve both ease of operation and reliability.
Data Source
AI summary
An embodiment provides for private key management for digital assets. A method provides a hosted digital wallet that mirrors at least a portion of data of a user digital wallet. The hosted digital wallet includes first data indicative of a first portion of a private key. The hosted digital wallet is associated with a smart contract storing second data indicative of at least the remainder of the private key that is not the first portion of the private key stored in the hosted digital wallet. It is determined that the user digital wallet is not compliant with condition(s) specified via the smart contract, a response to a third-party request is obtained prior to releasing the remainder, and the data indicative of the second portion of the private key is obtained from the smart contract, recovering the private key using the first data and second data.