CoinDCX unveils decentralized custody solution following WazirX hack
Indian crypto exchange CoinDCX has launched the world’s first decentralized custody solution, giving users direct control over their crypto assets.
According to an Oct. 30 announcement shared with crypto.news, 15 million CoinDCX users will be able to retain control over their cryptocurrency holdings without having to move the funds off the platform.
Typically, user funds are stored across hot and cold wallets controlled by exchanges, which are often vulnerable to attacks. With the new feature, CoinDCX users will be assigned a blockchain wallet that stores funds outside of the exchange’s infrastructure, reducing exposure to such risks.
Users also have the option to transfer their assets back to the exchange at any point in time.
Further, the new feature differs from traditional custodial wallets by eliminating the need for seed phrases and complex private key management.
Instead, it leverages common security standards like two-factor authentication and multi-party computation, which acts like a “dual-key bank locker, where both user and platform authorization are needed to access assets,” according to CoinDCX co-founder Sumit Gupta.
“This multi-layered security reduces the risk of unauthorized access, ensuring maximum protection for users,” Gupta added.
CoinDCX’s push for self-custody comes as the Indian crypto market continues to navigate the aftermath of the $235 million WazirX hack, which left roughly 16 million users without access to their crypto and cash holdings.
The attacker managed to drain over 45% of user funds stored in one of WazirX’s multi-signature wallets, prompting the exchange to suspend all services. Since the attack, there has been a surge in calls for self-custody options, as the incident spotlighted the vulnerabilities of centralized custody models.
A month after the WazirX breach, CoinDCX established the ‘Crypto Investors Protection Fund’ to be able to compensate users in case the platform falls victim to a similar situation. Besides an initial allocation of roughly $6 million, the exchange will commit 2% of its brokerage income to the fund over time.
