Elliptic and Gem have announced a new partnership today that will involve Elliptic acting as a trusted and independent third party for the purposes of securely storing the third (backup) private key used on the Gem platform. In the past, multisig wallet users have been in control of their own backup private keys, but this new offering from Gem and Elliptic could offer a higher level of security for individuals who do not wish to take care of their own backup solutions. Up to this point, Elliptic has been an insured bitcoin storage provider for a variety of banks and exchanges who need to protect their private keys, so choosing them as the custodians of backup keys for multisig wallets seems like a wise move by Gem.
An explanation of the third key
Over the past year or two, it has become clear that multisig wallets are the wave of the future. Gem CEO Micah Winkelspecht clearly understands this point, which is why his company has been working to allow developers to create the most secure multisig wallets via Gem’s API. With this new setup involving Elliptic, Gem will not be in control of more than one private key. Instead, one private key each will be held by the user, Gem and Elliptic. Both Gem and Elliptic believe this solution provides a higher level of security than the traditional multi-signature wallets created through a single provider.
Insured third-key storage
Perhaps the most unique feature of Elliptic as a third-key custodian is the fact that they’re able to offer insurance against unauthorized use of that third key. When clarifying exactly what this insurance policy covers, Elliptic Analyst Nathan Jessop told Bitcoin Magazine, “We are insured against losses due to unauthorized use of the third, backup key that we hold – this covers both criminal and accidental loss.”
When speaking to the importance of insurance for the third key in a multi-signature wallet, Elliptic CEO Dr. James Smith explained:
“At Elliptic, our focus is on bringing bitcoin to the enterprise by developing secure and convenient products and processes. By combining Gem’s API platform with our insured and accredited key storage service, a new bar has been set for multi-signature wallet security and usability.”
A new standard for multisig wallets?
It’s clear that both Gem and Elliptic believe this is a huge leap forward for multi-signature wallets and bitcoin in general. As Gem’s Winkelspecht noted:
“Now clients can rest easy knowing that even if they lose their private key, they can rely on two independent parties to secure their assets. Elliptic is the most trusted name in private key storage and our tight integration means that there is no single point of failure for Gem’s multi-signature wallets.”
Elliptic’s Jessop agrees with Winkelspecht’s assessment of the new partnership, and he also added:
“I believe this model will become more common, although it’s important to point out that it’s not just about the multisig scheme – the security and controls of the parties holding keys are still important. Elliptic combines insurance with accreditation by KPMG to the same standards as a custodian bank.”
In the future, Elliptic also plans to provide this sort of private key storage for alternative assets that are tracked via the blockchain. Over the long term, Jessop noted that the company plans to focus on secure storage, asset transfer and an auditable chain of ownership. Jessop also mentioned that the combination of their accreditation from KPMG with their insurance offering has led to “significant institutional interest.”