QuadrigaCX CEO Revealed Cold Storage Plans Years Ago

This dilemma has led cryptocurrency exchanges to seek all sorts of solutions to protect their customers’ coins. For example, the Winklevoss brothers famously cut up the paper private keys for their cold storage wallets and put the pieces into different safety-deposit boxes. Others have sought more personnel-related solutions — like restricting private key information to only C-level employees. The recent news of QuadrigaCX filing for bankruptcy shocked customers. It now appears that former CEO Gerry Cotten’s solution to the protection problem was far from perfect. Cotten actually revealed his plan five years ago on a podcast called “True Bromance.” During the show, he explained how the exchange could keep coins protected, telling the co-hosts:

At Quadriga CX, we’re obviously holding a bunch of Bitcoins that belong to other people who have put them onto our exchange. So what we do is we actually store them offline in paper wallets, in our bank’s vault in a safety deposit box because that’s the best way to keep the coins secure.

However, in spite of stating that this was the method used at that time, it appears that the CEO, who passed away in India at the end of 2018, must have changed his methods. The exchange has claimed that Cotten was the only one with the private keys for cold wallets holding more than $143 million in customer coins.

Protecting the People

The Canadian government is now involved and seeks to determine where the keys were stored — and if anyone has access to them. In the meantime, the news that someone at the exchange recently sent almost $400,000 in new coins to one of the cold wallets has only increased the public ire. In an ironic twist of fate, Cotten told his interviewers that cold wallets were a great way to protect coins, as QuadrigaCX was doing with its customers’ funds. He stated:

The paper wallet is a great way to store your Bitcoins… So that way you can never have your Bitcoin stolen, unless someone, like, breaks into the bank, steals your safety deposit box and gets into your private key and so forth.

Now, with Cotten gone and access to the coins lost, the hunt is on to discover where he kept the private keys to the cold wallets. If he continued using the older paper method, it may be possible to discover where they are among his personal effects. If he had begun using newer methods for protection, however, the coins may be impossible to find.

Educate the Masses

The disheartening events surrounding Quadriga’s struggles have brought increasing emphasis on the public/private debate in cryptocurrency. Nakamoto’s original whitepaper touted the power of private, unregulated funds. However, with new users seeking simpler methods, the market has continued to move increasingly public. Most early Bitcoin adopters moved funds into BTC because it provided a level of autonomy that no other financial system ever could. By holding one’s private keys, funds were only ever accessible to the owner. As the market has matured, however, most new Bitcoin users have sought simpler and more traditional methods for moving funds into and out of the cryptocurrency. This led to the rise of cryptocurrency exchanges where new customers, unfamiliar with Nakamoto’s vision, have stored their entire wallet balance. When events like Cotten’s death or Cryptopia’s recent hack occur, exchange customers suffer dramatic losses. These could have been easily avoided had they understood the underlying premise of the Bitcoin model — and kept their private keys themselves. These events prove that the greatest need for cryptocurrency adoption is increased education. [bctt tweet=”As the general public comes to understand the elegance of #Bitcoin’s privacy capabilities, not only will coins be safer, but adoption will inevitably increase.” username=”beincrypto”] Until then, events like QuadrigaCX will continue to plague the industry. Think investigators will ever determine where Quadriga’s missing private keys are? Or are the exchange’s customers out of luck? Let us know what you think in the comments below!