VNX, U of Luxembourg partnership aims to cut crypto security costs by 50%
A new partnership aims to solve the most pressing crypto security issues.
Digital asset storage is one of the main hurdles of institutional investors thinking of entering the space. A series of high profile exchange hacks, the sheer cost if implementing these solutions and the difficulty of getting bulletproof asset security is still quite off-putting.
This has carry-on effects, such as inconsistent and expensive insurance costs, assuming exchanges can even get cover for stored client digital assets.
Being able to step forward the industry's cybersecurity is a worthwhile goal, and a new partnership between the VNX trading platform for tokenised venture capital assets, and the University of Luxembourg's Interdisciplinary Centre for Security, Reliability and Trust (SnT), is aimed at solving this.
Up to 50%
"In creating a secure and regulatory compliant marketplace for the transparent trading of tokens representing digital assets we aimed to introduce modern security mechanisms that could totally secure our platform and could impact the global cybersecurity market," said Alexander Tkachenko, VNX Exchange founder and CEO. "We expect that the results of our cooperation with an institution as specialized as SnT will reduce global expense on security by as much as 50% of the current forecasts."
This partnership will include work on new IT frameworks for facilitating the secure exchange of digital assets, assessments of different distributed ledger architectures and perhaps most importantly, the creation of reasonable rules and regulations to further reduce the risks and unpredictability associated with the holding and trading of digital assets.
"This is an original use-case for blockchain," explained Radu State, network security expert at SnT. "Working with VNX Exchange, we can provide IT solutions that will establish VNX as a global leader in its sector. Broadly, we need to address two aspects – protecting against criminals who might try to hack the system to steal money or information, and guaranteeing compliance with anti-money laundering and KYC regulations."
The now-familiar centralised systems are relatively easy to protect, State says, but blockchain architecture introduces a new range of potential vulnerabilities and complexities, including the potential for vulnerable smart contracts.
"Traditional systems, where you have a user interface, a database, and a networking level to coordinate them, have been around for a long time, so we know how to protect them. However, for new, heterogeneous systems that issue tokens on the blockchain, there are still several important unsolved challenges. The first is security at the software layer – you need to ensure that there aren’t any vulnerabilities in the smart contracts that control the execution of individual transactions."
The second point is the blockchain itself. It can be extremely difficult to protect against protocol-level vulnerabilities, except by using a protocol that isn't vulnerable.
"The second is ensuring the security of the blockchain platform itself, based on both the consensus algorithm and access rights," State says. "And the third is ensuring the security of the database, where you need to provide end-users with proof that the platform is working as it should, while keeping the data on the platform."
"[SnT's] past research activities in FinTech have left us confident in their abilities," Tkachenko said. "I believe that blockchain technology is the next big step in the financial sector’s evolution. This evolution will require three things: regulatory clarity, investor protection, and compatibility with current market standards. We hope that this partnership will make major strides in securing all three."
In the case of VNX, which aims to focus on tokenised venture capital assets, this level of clarity might be especially important for delivering the promise of tokenisation and blockchain to investors. Plus, as it uses tokenisation to open up the field of venture capital investing to a wider range of participants, new questions around consumer protection might be raised. Regulatory and security standards might be essential in answering them, while cutting the cost of security itself can help make this field affordable for the new wave of participants.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, XLM, BTC