Bitcoin exchange Bitfinex has become the next major player to employ BitGo’s multisignature wallets, learning its lesson after suffering a hacking in which it possibly lost funds.
They follow the lead of Bitstamp, another USD-bitcoin exchange, which earlier this year reported losses equaling roughly $5 million after a hot wallet attack, and subsequently turned to BitGo’s solution.
Multisignature wallets require more than one key to sign a transaction, vastly reducing the chances of successful attacks. Multisig solutions such as those of BitGo have held up well thus far and have yet to be compromised. They are becoming increasingly standard throughout the industry, having been adopted by numerous enterprises with large holdings.
Why Ethereum Needs Layer 2 Solutions More Than EverGo to article >>
In addition to multisig, the BitGo solution also segregates the funds of each client, keeping fewer eggs in one basket. Traditionally, brokers in the trading industry, whether crypto or otherwise, keep client funds bundled together.
With BitGo’s scheme, any transfer to/from a client account must be processed over the blockchain, which increases its traceability. Said Zane Tackett, Director of Community & Product Development at Bitfinex:
“The era of commingling customer Bitcoin and all of the associated security exposures is over. The trading community has long sought individually verifiable accounts without sacrificing security or performance. With the help of BitGo’s multi-signature technology, the Bitfinex team is very excited to be the first exchange in the world to automate Bitcoin settlements using ‘On-Blockchain’ customer segregated wallets.”
Bitfinex is currently the world’s largest USD-based bitcoin trading venue, based on published trading figures from the past 30 days.