How Does Key Sharding Keep Your Assets Safe?

2023-07-17  •  3 min read

At the heart of crypto asset management and security lie private keys. A private key is a unique alphanumeric code that grants users access to their digital assets. To further enhance their security, a private key can be divided into multiple pieces, referred to as key shares or key shards.

What is key sharding?

Key sharding involves distributing private keys and transaction data across multiple shards. Each shard is responsible for storing and processing a subset of the overall data. By breaking down the data into smaller, more manageable pieces, key sharding aims to distribute the computational workload and enhance system efficiency, ensuring that no single party holds complete control over the full key. To access the crypto assets associated with a private key share, a predetermined number of shares must be combined using a specified algorithm or protocol.

This method has become a prominent technique in the crypto custody industry, with significant advantages in terms of data storage, performance optimization, and security enhancement. Multi-party computation (MPC) uses key sharding to provide institutional clients with the highest standards of security by requiring M out of N (e.g. 3 out of 5) number of key shares to validate a transaction for signing. Ceffu’s institutional wallets are backed by MPC technology. 

Benefits of key sharding

Distributed trust

In the event of a breach or a compromised shard, the attacker would only gain access to a portion of the data, minimizing the impact on the overall system. This distributed approach adds an extra layer of protection against single points of failure and malicious attacks.

Elevated performance

Key sharding enables the system to handle a high volume of transactions without compromising performance. By leveraging parallel processing and efficient resource utilization, key sharding ensures that the cryptocurrency network can scale to meet the demands of a growing user base.

Higher scalability

Key sharding enables horizontal scalability by adding more shards to accommodate increased transactional volume. This scalability allows the cryptocurrency network to grow and handle larger capacities without sacrificing performance or efficiency.

Fault tolerance

Key sharding provides built-in fault tolerance capabilities. If a shard or storage node becomes unavailable or experiences a failure, the remaining shards can continue to operate, ensuring uninterrupted service. This fault-tolerant design improves the overall resilience of the cryptocurrency network, reducing the risk of data loss or service disruption.

How Ceffu uses key sharding to protect its clients’ assets

Ceffu’s institutional wallets – Qualified Wallet (cold storage), Co-sign Wallet (warm wallet) and Prime Wallet (hybrid of hot and cold) – all run on multi-party computation technology to ensure that no single entity or individual ever has access to the full private key. Our clients’ key shares are individually stored in air-gapped FIPS 140-2 devices distributed across different geographical regions. 

To provide clients with a more inclusive transaction-signing experience, our new Co-sign Wallet requires 2 out of 3 key shares to approve transactions, one of which remains in the user’s ownership by binding it to their personal device of choice. 

For more information on Ceffu’s custody services and other relevant questions, please contact our team of Account Managers by filling out this short institutional form.

About Ceffu

Ceffu is a compliant, institutional-grade custody platform offering custody and liquidity solutions that are ISO 27001 & 27701 certified and SOC Type 1 & Type 2 attested. Its multi-party computation (MPC) technology, combined with a customizable multi-approval scheme, provides bespoke solutions allowing institutional clients to safely store and manage their digital assets. Such solutions include insured on-chain cold storage, escrow services, staking, OTC and spot trading.

Institutions also benefit from Ceffu’s secure gateway to a wide range of liquidity products within the Binance ecosystem as Binance’s institutional custody partner through Mirror, its off-exchange settlement solution.

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