Gerald Cotten’s sudden death left C$190 million ($145 million) in Bitcoin and other digital assets protected by his passwords unretrievable. Without the digital keys, clients lose access to digital coins and funds.
Digital-asset exchange Quadriga CX has a $200 million problem with no obvious solution — just the latest cautionary tale in the unregulated world of cryptocurrencies.
The online startup can’t retrieve about C$190 million ($145 million) in Bitcoin, Litecoin, Ether and other digital tokens held for its customers, according to court documents filed Jan. 31 in Halifax, Nova Scotia. Nor can Vancouver, B.C.-based Quadriga CX pay the C$70 million in cash they’re owed.
Access to Quadriga CX’s digital “wallets” — an application that stores the keys to send and receive cryptocurrencies — appears to have been lost with the passing of Quadriga CX Chief Executive Officer Gerald Cotten, who died Dec. 9 in India from complications of Crohn’s disease. He was 30.
Cotten was always conscious about security — the laptop, email addresses and messaging system he used to run the 5-year-old business were encrypted, according to an affidavit from his widow, Jennifer Robertson. He took sole responsibility for the handling of funds and coins and the banking and accounting side of the business and, to avoid being hacked, moved the “majority” of digital coins into cold storage.
His security measures are understandable. Virtual currency exchanges suffered at least five major attacks last year.
The problem is, Robertson said, that she can’t find his passwords or any business records for the company. Experts brought in to try to hack into Cotten’s other computers and mobile phone met with only “limited success” and attempts to circumvent an encrypted USB key have been foiled, his widow, who lives in a suburb of Halifax, said in the court filing.
“After Gerry’s death, Quadriga’s inventory of cryptocurrency has become unavailable and some of it may be lost,” Robertson said. The company’s access to currency has been “severely compromised” and the firm has been unable to negotiate bank drafts provided by different payment processors.
Quadriga CX’s directors posted a notice on the firm’s website Jan. 31 that it was asking the Nova Scotia court for creditor protection while they address “significant financial issues” affecting their ability to serve customers. On Tuesday, the court granted Quadriga a 30-day stay in a bid to stop any lawsuits from proceeding against the company, The Canadian Press reported. The firm was also granted protection from creditors.
“For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us,” the firm said. “Unfortunately, these efforts have not been successful.”
As is often the case with crypto, the episode has raised speculation on Reddit’s online forums, where posters are wondering aloud if the business was a scam, calling for class-action lawsuits and even concocting conspiracy theories that call into question whether the CEO is even deceased. The latest online speculation suggests that Quadriga CX funds have been moving — even though the firm claims they can’t get access.
Cotten filed a will 12 days before his death listing substantial assets, according to court documents.
He left all his assets to his wife and made her the executor to his estate, the documents show.
The will outlines numerous assets he held, including several properties in Nova Scotia and in Kelowna, B.C., a 2017 Lexus, an airplane, a Jeanneau 51 yacht and his pet chihuahuas, Nitro and Gully.
Compressed-air energy storage isn’t carbon neutral, but it’s a lower-carbon option.
Decarbonizing the world’s electricity grids won’t be an easy task, but it is a necessary one if we’re going to mitigate some of the worst effects of climate change. Since wind and solar power are intermittent, part of decarbonizing the grid will involve storing renewable energy for use when the Sun isn’t shining and the wind isn’t blowing.
While day-to-day storage will cover the gaps when the wind slacks or the Sun sets, on grids with more than 80 percent renewable energy you’re also going to want inter-seasonal storage. This is because sun and wind are seasonal, and energy demand is also seasonal—people use a lot more energy in the winter than they do in the spring, because it’s darker and colder outside.
Researchers from the University of Edinburgh and the University of Strathclyde think that one potential step toward seasonal storage should involve identifying large underground saline aquifers where energy could be stored as compressed air. Saline aquifers are usually found underwater; the compressed air will displace some of the water, which can be discarded, as it’s not potable.
Massive reservoirs of compressed air could handle the inter-seasonal gaps that high-renewable grids might struggle with. The researchers suggest a system where excess renewable energy is used to compress air and pump it down into a saline aquifer over the course of several months. Then, when it’s needed in the winter, the air is brought back up and expanded, powering a turbine that drives electricity back onto the grid.
The cycle is comparable to how many regions store and use natural gas. That is, excess natural gas is pumped into underground storage caverns where it sits for a few months. In the winter, when gas is needed to heat homes, those stores are drawn down. The difference here is that the energy being stored isn’t chemical.
The researchers used existing geological mapping that was conducted around the United Kingdom to find potential storage areas for carbon dioxide (CO2), but their method for vetting geological repositories for compressed air storage could be applied to underwater geographies around the world.
They found that at least 77 to 96 terawatt-hours (TWh) of electricity could be stored in aquifers off the British coastline. (That is roughly 160 percent of the UK’s electricity consumption in January and February 2017, so combined with other forms of electricity, it would be more than enough for a typical winter.)
An imperfect solution
Despite the sound theoretical basis for developing massive underwater wells for storing compressed air, the researchers acknowledge that it’s an imperfect solution to our energy storage problems.
For one, it’s expensive. The researchers estimate that storing compressed air in saline aquifers would cost in the range of $0.42 to $4.71 per kilowatt-hour (kWh).
For comparison, Lazard’s 2018 Levelized Cost of Storage report (PDF) found that the high-end cost of lithium-ion batteries for wholesale energy storage was about $298/MWh, or about $0.30/kWh. Of course, most utility-grade lithium-ion batteries on the world’s grids today are geared toward short-duration frequency response rather than long-duration applications like compressed-air energy storage schemes. Somewhat higher-cost, long-term energy storage schemes might be viable if governments start mandating more and more renewable energy on the grid.
Another problem with this scheme is that carbon-neutral compressed-air energy storage isn’t (yet) commercially proven. When conventional compressed air systems need to expand the stored compressed air to put additional energy on the grid, they do it by warming the air up by burning fossil fuels. Very cutting-edge compressed-air systems can be carbon neutral by recycling the heat that’s removed from the air when it’s compressed, but these so-called “advanced adiabatic compressed air systems” exist only as pilot projects and small-scale trials, unlike conventional compressed air systems, which have been in use for decades.
Even if it involves heating the air with fossil fuels, compressed-air energy storage emits less carbon per kWh than running a natural gas plant (and currently many grids, especially in the US, use quick-starting natural gas plants to complement the intermittency of renewables, so exchanging that for compressed-air energy storage is an advance in the right direction). Conventional compressed-air energy storage releases approximately 228g of CO2 per kWh, which is “less than the 388 grams of CO2 per kWh reported for the combined cycle gas turbines used in gas power plants,” the paper notes.
For now, even conventional compressed air energy storage is rather rare; only two commercial compressed air facilities are currently operating: one on the grid in Germany and one in Alabama. In their paper, the researchers write that 8TWh of potential compressed air storage could be built out in the UK onshore, in salt caverns. Using these onshore caverns for compressed air would cost just a fraction of what it would cost to build compressed air storage in saline aquifers. For that reason, the researchers recommend that compressed air facilities “should be initially developed onshore to improve the technology and reduce operational costs.”
Love it or hate it, cryptocurrency is enjoying its time in the technology spotlight. Whether you’re simply grabbing a few bitcoins to experiment with this new currency or you’re a more seasoned digital currency investor, your process will remain similar. To purchase or trade digital currency, you’ll need access to an exchange, either an organized platform under a single corporate flag such as Coinbase Consumer, or one of the more automated and distributed exchanges that have lately started to emerge, such as ShapeShift.
Via the exchange, you’ll be able to purchase and trade your chosen crypto-bucks. But if you’re looking to store your new currency or even spend it on goods, services, or debts, then you’ll need a cryptocurrency wallet. But just like the constantly shifting crypto exchange landscape, the concept of the perfect cryptocurrency wallet is a constantly moving target, too.
What Is a Cryptocurrency Wallet?
Cryptocurrency wallets come in several different forms and can span software, hardware, or even paper. But they’re all intended to store at least one kind of digital currency, and in the case of cryptocurrency, manage the cryptographic keys and other security considerations associated with key storage, digital currency transactions, and sometimes identity (ID) verification.
When you’re talking about the cryptographic keys associated with your cryptocurrency wallet, you’re referring to a very long string of numbers and letters that’s machine-generated, and is used to lock and unlock access to your cryptocurrency collection as well as to generate the addresses of your wallet. That’s a lot of power to attach to a key, so where these keys are generated and who controls them is something you should consider carefully when choosing your cryptocurrency wallet platform.
Kinds of Cryptocurrency Wallets
Currently, there are five basic kinds of cryptocurrency wallets:
1. Cold Wallets: This kind of cryptocurrency wallet uses keys created by a source that’s not connected to the internet. This adds an extra layer of “air-gap” security and lets these wallets come in a hardware format. Usually some kind of portable Universal Serial Bus (USB) hard disk or thumb drive.
2. Hot Wallets: As you might expect, this kind of cryptocurrency wallet uses keys generated by internet-connected devices, typically servers at the wallet manufacturer’s location or the wallet’s back-end exchange. Even though the internet connectivity makes hot wallets notably less secure than cold wallets, they’re still the most popular cryptocurrency wallets in use today since they’re easily able to trade currencies, make internet purchases, and even access other kinds of digital assets besides cryptocurrency.
3. Decentralized Wallets: You’ll see this term a lot, and it simply means that the cryptocurrency wallet has no centralized back end you need to work through when you want to sell, trade, or buy. You control your wallet’s keys, and that lets you connect and generate a transaction with anyone, anywhere. Then again, you control your keys, which means you better protect the heck out of them or face a potentially very bad day.
4. Hosted Wallets: This is the opposite of decentralized, where the cryptocurrency wallet manufacturer or the exchange controls and stores your keys. On the one hand, they probably have better security than you do. But on the other hand, they’re also likely storing thousands of users’ keys, which means the hackers will be targeting them much more strongly than they would a single user like you. It also usually means that you’ll need to begin your transaction with the hosted environment rather than simply connecting with anyone you like. That’s not just an extra step; it also potentially impacts your privacy.
5. Paper Wallets: As the name implies, this type of cryptocurrency wallet boils down to printed sheets of paper that record your public and private crypto keys. To use a paper wallet, you simply transfer your digital currency to a public address that’s shown on your paper wallet. To spend some of it, you simply initiate a transfer and reprint your wallet. Quick Response (QR) codes are often used to turn large chunks of typing into faster and less-easily-copied scanning operations. Some folks don’t consider paper wallets a separate kind of wallet, instead referring to them simply as the “coldest of cold wallets.”
In this cryptocurrency wallet review roundup, I’m reviewing hot wallets with an eye toward multicurrency support. All of the cryptocurrency wallets reviewed here support more than one kind of digital asset, though some support far more than others do.
A Word on Exchanges
Whether viewed from a financial or technical perspective, cryptocurrency moves fast. Blockchain technology is in an almost constant state of innovation and even conflict, while the regulations regarding cryptocurrencies are also in flux in multiple jurisdictions all over the globe. From an investor’s standpoint, this isn’t just a commodity, this is truly the Wild, Wild West. That can make choosing the right exchange on which to do your crypto-trading a crucial decision.
Fortunately, exchanges don’t have to be so wild and woolly. It depends on what kind of investor you want to be. In the reviews that follow, we make mention of two basic “personalities” when it comes to exchange trading. Those that want a more stable and regulated environment can choose an exchange that specifically caters to this kind of customer, such as Coinbase Consumer (mentioned above). This kind of exchange is characterized by lots of effort being paid toward adhering to the financial regulations of its geographic jurisdiction. In the case of Coinbase, that’s the U.S., which means the exchange is going to do whatever it needs to maintain compliance with U.S. banking laws. That includes gathering lots of information on the people who trade with it, including personal contact information as well as financial data, like your Social Security number. Another characteristic of a more controlled exchange is fewer options when it comes to what kinds of cryptocurrencies you can trade. That’s because each type of cryptocurrency is being evaluated individually by each country’s banking regulators, so an exchange that wants to remain in compliance with banking laws needs to move slowly and carefully when it comes to the currencies it supports.
That bothers a lot of crypto-investors, who are attracted to this commodity specifically because of the large number of currencies they can trade (hundreds on some exchanges!) and because of the anonymous nature of the transaction. These folks represent true cryptocurrency speculators, and if you’re on of these, then regulated exchanges like Coinbase are not for you. You’re looking for exchanges with a wide swath of currency support and as little information as possible being gathered on both the transaction and its participants. In the reviews that follow, we pull out Shapeshift as one exchange that fits this kind of bill. However, in true crypto-fashion, in the time it took to write these reviews, the market changed and Shapeshift altered its anonymous trading policy in favor of one that adheres to KYC banking guidelines intended to combat money laundering and other financial crimes. That measure will help Shapeshift with scrutiny from banking regulators, but it’ll effectively kill its reputation for privacy.
If you’re still in the market for a Shapeshift-style exchange, however, don’t fret as there are still plenty of options. One that’s moved very quickly to capitalize on Shapeshift’s change of heart is Flyp.me, which offers about 26 cryptocurrencies, everything from Bitcoin Cash and Litecoin to some fairly fringe altcoins. There’s also Coinswitch, which boasts support for over 300 cryptocurrencies, though it also seems to be built on top of several other exchanges, including Shapeshift and Changelly, so it remains to be seen how Shapeshift’s new KYC policy will affect Coinswitch. Changelly is another Shapeshift-style option, however, with support for a wide range of cryptocurrencies and fairly little personal information required to start trading.
All that said, however, be very careful when picking your exchanges. There’s still plenty that can go wrong with a crypto-investment these days, up to and including the loss of your funds. Therefore, picking a platform from which to store, invest, and trade cryptocurrency is an important part of maintaining a positive experience and not getting burned. Research your platform carefully, ask current traders about it before using, and when investing, start small.
Desirable Cryptocurrency Wallet Features
The most important feature you should be looking at when choosing a cryptocurrency wallet is whether or not it supports the currencies you want to use. Bitcoin is a standard, but even this currency isn’t supported by every cryptocurrency wallet, and not even by every cryptocurrency wallet reviewed in this review roundup yet. There are literally dozens of cryptocurrencies available today, with more on the way.
If you want to use a specific currency for some reason, then you need to make sure your cryptocurrency wallet supports it. If you want to dabble in multiple currencies or other kinds of digital assets, then you should make sure that your cryptocurrency wallet supports as many as possible, and can also easily connect with an exchange that allows multicurrency operations. Both Exodus and Jaxx fit this particular bill.
If you’re looking to speculate, then you’re likely comfortable with a certain amount of risk. You’re probably also interested in protecting your transaction privacy. This means you should be looking for a cryptocurrency wallet that doesn’t require any specific exchange on the back end, or if it does, then it’s an exchange that doesn’t require much in the way of ID verification or identifying transaction data. ShapeShift is currently a very popular exchange for these kinds of users (but not covered in this cryptocurrency wallet review roundup). Again, both Exodus and Jaxx are good fits for you.
But maybe speculating isn’t your thing. Perhaps you’d like to experiment with cryptocurrency but you want to do it in a safer, more regulated environment, and you’re willing to give up a certain amount of transaction privacy to do it. This kind of user is looking for a regulated exchange such as Coinbase Consumer, which also makes the Coinbase Wallet (included in this review roundup). Coinbase is a company in the United States that goes to great pains to meet U.S. banking regulations and has the deep venture capital (VC) financial backing to do it. You’re limited in the kinds of currencies and assets you can access via Coinbase Consumer or store in the Coinbase Wallet, but many people feel safer using this kind of platform for that very reason.
Next, there are more minimalist cryptocurrency wallets, such as BRD and Copay Bitcoin Wallet (also included in this review roundup). These are primarily mobile wallets intended to let you track and access your digital funds on the go. They’re not meant to work as trading platforms nor as holders of large amounts of different kinds of digital assets. The good thing about these solutions is that their security is decent and you can use many of them at the same time.
The Security Question
You may be wondering if cryptocurrency wallets are safe. Unfortunately, that’s not an easy question to answer. On a day-to-day basis, all of the cryptocurrency wallets I reviewed in this roundup are safe and employ a basic layer of security to protect your assets. But, yes, some are a little safer than others.
At a basic level, these cryptocurrency wallets all have password-controlled access to them, which is potentially another passcode or pin code to control access to your account (though most often this is one step, not two). They encrypt all transaction data via Secure Sockets Layer (SSL) while in transit, and they securely store your public and private keys, either encrypted on your local device or on the cryptocurrency wallet maker’s servers.
That’s the minimum level of security any cryptocurrency wallet should support, and surprisingly, it’s all that four out of our five reviewed cryptocurrency wallets can do. Only Coinbase and Copay Bitcoin Wallet added more security than what I just listed, even though many cryptocurrency wallet customers are asking primarily for two additional capabilities: two-factor authentication (2FA) and multi-signature support. What are these features?
2FA: This feature would generate a token or key from the cryptocurrency wallet maker that you’d need to know to access your wallet. Generally, this additional code is initially sent via an email or text. However, things aren’t over once you enter the code. Once this code is entered and you have full access to your cryptocurrency wallet, the two-factor system will keep generating new codes every few seconds. That means, to hack your account, malcontents would need to know not only your primarily account credentials but also your device itself. That’s significantly more difficult and dangerous for the bad guys to do, so it’s an excellent additional layer of security.
Multi-Signature Support: This feature works like a joint bank account but at the key level. Typically, such a system is referred to as a “two out of three” system. That’s because it generates three keys: one controlled by the account holder (you), one that’s controlled by the service, and one that’s shared. To access the account, you need at least two out of the three keys. There are variations on this feature, including the 3-of-5 scheme that Coinbase uses for its Vault service.
Overall, the cryptocurrency wallets I review here in this roundup represent some of the best hot wallet solutions available. All of them will do well for you whether you’re a beginner or a seasoned veteran. However, even among this relatively small group, you’ll need to decide which of two basic camps you fall into before you can choose the right cryptocurrency wallet for you. The first camp is composed of the speculators who are comfortable with risk and therefore aren’t looking for a cryptocurrency wallet that asks a lot of questions. The second camp is made up of conservative investors who are interested in fewer digital assets and desire a safe environment that’s more akin to our regulated banking industry.
If you’re in camp number 1, then you’re best off with our Editors’ Choice Exodus. This cryptocurrency wallet is easy to use and supports a huge number of digital asset types via the distributed exchange ShapeShift. If you’re in camp 2, then our Editors’ Choice Coinbase Wallet is the cryptocurrency wallet you want. This one is backed by a reputable U.S. firm that’s not only well funded, but also well secured and in compliance with all relevant U.S. banking laws.
There are many more cryptocurrency wallets, and we’ll be adding reviews for them over time. For now, the five reviews here will get you safely started in the exciting cryptocurrency space that’s rewriting how the financial industry works.
A little matter like death shouldn’t come between your family and your KIN.
Ripple just lost half a billion dollars in market cap, at least until someone finds Matthew Mellon’s key. The unexpected death left hundreds of millions of dollars in blockchain limbo, and his family is scrambling to find a way to access them.
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The banking heir (and early XRP adopter) had been struggling with opiate addiction, and was apparently on his way to a rehab facility. Somewhere along the way he stopped for a trip on Ayahuesca, and a heart attack cut his trip short.
It’s probably not the first crypto-fortune to vanish into thin air. Unless Mr. (or Ms.) Nakomoto is living a very frugal lifestyle, it seems quite likely that the inventor of Bitcoin has already passed on, leaving about a million unclaimable bitcoins—not to mention the corresponding fortunes in Bitcoins Cash, Gold, Private, and so on.
More coins are lost to carelessness than hacks, and as early adopters get older (and wealthier) it’s becoming more important to highlight the best practices for preserving your coins after you die.
With that in mind, here are a few ways to ensure that you don’t keep HODLing through the afterlife.
How to preserve your coins, in case you die tomorrow
The vast majority of crypto-wallets are not well secured, for the simple reason that their balances are too low to worry about. But even pocket-change is worth holding onto, as some early adopters learned the hard way.
The simplest thing to do is to leave your money on an exchange. That sounds like terrible advice toserious players, but Coinbase is a lifesaver for crypto-newbies. It certainly helped the family of one Colorado hodler:—after the young man died unexpectedly, the family brought his death certificate to recover his Coinbase Vault.
A better safeguard might be to share your private keys with your loved ones—depending on how much you trust them. BIP39 words make it easy to store wallet data, even on innocent-looking scraps of paper—just make sure your family knows where to look for them.
One thing to avoid: Flash drives are not particularly resilient, and ledgers have uncertain lifespans. If you want something to last a few decades, pen and paper, or metal, will do the trick.
How to preserve your coins, in case you die next year
These systems are not ideal, for obvious reasons. For one thing, some people aren’t willing to wait that long for their inheritance, and it’s a bit tempting when grandpa keeps the key to his fortune on the back of a receipt. More to the point, things can get lost, go missing or catch fire—and if that happens, you definitely don’t want to be telling an insurance adjuster that you kept a million dollars on a Post-It.
If you have more time to prepare, a safe deposit box is probably your next best bet, unless you have a few hundred bucks to spend on a fireproof safe. It may seem counterintuitive to store “the future of money” in an old-fashioned bank, but that’s a lot less silly than letting a fortune disappear when you die.
The Gemini twins use a similar failsafe. Instead of leaving their wallet in a single bank, the Winklevosses locked their Bitcoin fortune on a paper wallet and ripped up the key.The fragments were distributed across several bank vaults. Reassembling it would take quite a few bank robberies….or the greatest video game quest of all time.
One thing to remember: unlike deposits, bank boxes are not insured. If they get robbed, the money’s gone. There are a few ways to make things more secure—you could leave an encrypted wallet in the bank and tell the password to your lawyer or spouse.
How to preserve your coins, in case you die in a decade.
Most of these ideas are makeshifts—they rely on trusting someone else to follow the rules after you’ve already kicked it. Most of us can’t get far without relying on a lawyer or a bank—but crypto is supposed to get us away from trusting third parties.
But what if there were a way to put your will in code?
Instead of using a regular wallet, imagine storing your money in a smart contract instead—which can be coded with the provisions of your will. You’d have the Master Key, which you can use to spend money whenever you want. But if misfortune befell the owner, the wallet could also be opened with the right combination of private keys. Perhaps all of your children would have to open it together, or half of them plus your lawyer, or all the kids and grandkids combined.
That may sound futuristic, but it’s closer than you’d think. One company, MyWish, is already creating worry-free smart contracts on the NEO blockchain, covering everything from wills to prenuptial agreements. If you don’t like NEO, Bitcoin can handle wallets with up to twenty signatures, and Ethereum can be even more complex.
But then you’d have another problem to worry about: if something happens to your kids, what happens to their private keys?
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