Coinbase Thinks It’s a Good Idea to Backup Private Keys to the Cloud

On Tuesday (February 12th), cryptocurrency exchange Coinbase said that the Coinbase Wallet app for iOS and Android had been enhanced such that it was now for users to backup an encrypted copy of their private keys to the cloud (iCloud in the case of iOS users and Google Drive in the case of Android users).

Exactly one week after launching Bitcoin (BTC) support on Coinbase Wallet (formerly known as "Toshi"), Coinbase announced that it was "introducing cloud backup for your private keys on Coinbase Wallet". Here is the tweet Coinbase sent out:

According to the blog post by Coinbase Wallet Product Lead Siddharth Coelho-Prabhu, this new feature "provides a safeguard for users, helping them avoid losing their funds if they lose their device or misplace their private keys."

Coinbase thinks although it is great that Coinbase Wallet allows users to experience "the full power of an open financial system" (i.e. " storing their own funds and accessing them anywhere in the world"), this power comes with "great responsibility." Since private keys, which are "generated and stored on your mobile device", are "the only way to access your funds on the blockchain" and owns of non-custodial wallets such as Coinbase Wallet "sometimes lose their devices or fail to backup their 12 word recovery phrase in a safe place, thereby "losing their funds forever," it would be a good for users of Coinbase Wallet to use cloud backup for their private keys, and it is now providing a feature that enables just that.

The new opt-in cloud backup feature provides "the ability to store an encrypted copy of your recovery phrase on your personal cloud account." You will, of course, need to come up with a strong password and a way to remember it somehow, but if "you lose your device or get signed out of the app," you will be able to "easily regain access to your funds with the combination of your personal cloud account (iCloud or Google Drive) and your password."

Coinbase wants you to know that this backup is "encrypted with AES-256-GCM encryption and accessible only by the Coinbase Wallet mobile app." And of course, if you lose the password for this backup, the support staff of Coinbase or your cloud service provider will not be able to help you since they don't keep a copy of this password:

"Coinbase will not have access to your password or funds at any time, preserving your privacy and control. Your cloud backup provider will also not have access to your funds, as only you know the password that decrypts your encrypted recovery phrase."

Although this feature currently only "supports iCloud on iOS devices and Google Drive on Android devices," Coinbase plans "to add support for other cloud services in the future."

Coinbase also wants to remind users that this feature is completely optional and needs to be explicitly activated. Also, it recommends that users also "backup their passphrase manually" after cloud backup activation and "activate Two-Factor Authentication on your personal Google or iCloud accounts to make those accounts harder for attackers to compromise."

Amongst experienced long-time investors in crypto, especially those who strong believe in its ideas of decentralization and self-sovereignty, the reactions on Twitters were quite negative. Here are a few examples:

 

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tZERO Opened Its Doors to Non-Accredited Investors, but Their Options Are Still Limited

Samuel Haig

Last week, tZERO announced that its securities tokens (TZROP) are now available to be traded to non-accredited investors, as per Rule 144 of the Securities Act of 1933.

Despite the launch, the platform offers limited functionality, Overstock's OSTKO security token and TZROP comprising the only markets that are currently available for non-accredited investors to trade. Traders are only able to place limit and market orders to purhcase security tokens using fiat currency, with tZERO's markets open for trade during weekdays between 9:30am and 4:00pm EDT.

Signing up to trade on tZERO requires submitting identifying documentation to the platform, with verification taking several days for the company to complete. As the platform develops and evolves, however, more functionality is to be expected.

TZROP Tokens to Generate Divident for Investors

TZROP were first issued via a private placement during August 2018, and have been tradable among accredited investors since January of this year. The tokens are now exclusively tradable on the PRO Securities alternative trading system (ATS) to investors who hold an account with Dinosaur Financial - a broker-dealer headquartered in New York.

According to a press release, the TZROP token offers investors “direct exposure to tZERO’s revenue growth through its quarterly dividend model,” with tZERO pledging to distribute 10% of its adjusted gross revenue to holders of its security token . Investors can reportedly choose to receive dividends in the form of BTC, ETH, TZROP, or U.S. dollars.

However, the release notes that the distribution of dividends is subject to approval from tZERO’s board of directors, and Delaware law.

Peer-to-Peer Trading of TZROP Tokens Prohibited

TZERO emphasized that peer-to-peer transfers of TZROP have not been authorized, asserting that TZROP holders must exclusively resell tokens “on the PRO Securities' [...] ATS only through a brokerage account established with Dino, a subscriber to the ATS, with clearing and custody provided by Electronic Transaction Clearing, a registered broker-dealer, and Computershare, as transfer agent.”

To comply with the company’s regulatory obligations, tZERO also reserves the right to prohibit tZERO security token holders from moving TZROP from Dinosaur Financial brokerage accounts to personal wallets.

The chief executive officer of tZERO, Saum Noursalehi, stated:

“Following the one-year anniversary of the close of our security token offering, non-accredited investors now have the ability to purchase and trade in our security tokens. Today marks another milestone as we further democratize access to all investors, regardless of net worth, can invest in the business opportunity of a blockchain-based capital market.”

TZERO Receives Patent for ‘TOME’ Technology

On Aug. 6, 2019, tZERO was awarded a patent for a process for recording trading data on a public blockchain, dubbed the “Time Ordered Merkle Epoch (TOME) methodology.”

According to the company’s announcement:

TOME is a base-layer technology that uses digital signatures to record and verify time-series data such as trades, executions and settlements. This technology enables low-latency systems, including traditional matching engines or private blockchain ledgers, to be anchored into immutable public blockchain ledgers.

TZERO plans to incorporate TOME into its product suite, in addition to licensing the technology to other firms.