Crypto Start-Up Provides Anti-Hacking Solution
According to Ledger, the well-known manufacturer of cryptocurrency hardware wallets, more than $1.5b of cryptocurrency assets has been stolen from exchanges over the past ten years. However, new crypto start-up called Arwen, which was previously known as Commonwealth Crypto, has just announced a demo version of its new trade app which protects traders while they’re trading assets via exchanges using layer 2 blockchain asset transfer protocol.
Arwen’s new technology combines off-blockchain atomic swaps and on-blockchain escrows, which means that traders never need to deposit their coins to the wallets held by centralised exchanges.
The use of layer 2 protocol lets users store their cryptocurrency anywhere (for example, a mobile or hardware wallet or a third-party custodian), and the blockchain-based escrows are directly funded from the user’s chosen solution. This allows the digital coins to remain secure while the trade is carried out.
The company’s co-founders, Ethan Heilman and Sharon Goldberg created Arwen to allow cryptocurrency traders access to “a system where blockchains would provide the security rather than a central trusted party that can be targeted” by hackers.
The start-up has so far received funding from several notable investors, including United Bitcoiners, Highland Capital Partners, Notation, Digital Garage, and Underscore.vc.
Following the hack last April on the myetherwallet.com cryptocurrency wallet, Arwen posted a blog explaining the high level of risks involved in holding digital coins such as Bitcoin and Ether in a web app. Even though the attackers never managed to breach myetherwallet.com’s servers, they successfully managed to redirect the website’s users to a bogus server using TLS, DNS, and BGP routing which was able to steal their credentials and cryptocurrency.
Sharon Goldberg also claims that crypto-hackers are “becoming more sophisticated”, as attacks involving the manipulation of multiple Internet protocols used to be much rarer. However, as last year’s myetherwallet.com hack shows, the advanced nature of the attack “feels less far-fetched” nowadays. Plus, it not only impacted the cryptocurrency wallet website, but all other services and websites using the DNS web service, Amazon Route 53 as all DNS traffic was redirected to the hacker’s bogus server.
The Lightning Network also uses a layer 2 solution to let traders make Bitcoin payments in a decentralised manner, and Arwen has harnessed some of the same technology to create a standalone network that’s meant specifically for exchanges and traders.
Although there are many benefits to the start-up’s new platform including the added security provided by being able to hold onto your own private keys, it’s not yet possible for anyone who wishes to trade on margin to do so. Plus, as all trades that are carried out on the platform are fully collateralised, users must pay a fee for the exchange “to collateralise a payment channel”.
At the time of writing, the demo version of the protocol supports Litecoin, Bitcoin, and Bitcoin Cash. However, thanks to its partnership with crypto exchange, KuCoin, Arwen’s finished product will also accommodate other cryptocurrencies including Ethereum and Zcash.
By Laura Kilby