Luno’s Bitcoin receive fee and security systems

Luno recently announced it had reached two million customers worldwide, and that it now operates in over 40 countries.

Unlike many other cryptocurrency exchanges, Luno charges you to load Bitcoin into your wallet from an external address.

This is to fairly distribute transactions fees among customers who receive funds and customers who send funds, Luno CTO Timothy Stranex told MyBroadband.

“Each Bitcoin transaction consists of several inputs and outputs,” Stranex explained.

When a customer receives a transaction, its outputs become part of Luno’s internal wallet pool. When a customer sends a transaction, these received outputs become the inputs of the next transaction.

“Every received output will eventually become the input to a future send transaction. The Bitcoin network fee – which is the fee paid to miners to process the transaction – is proportional to the size of the transaction,” said Stranex.

In other words, each receive transaction will incur a cost in the future when it is spent. By charging a receive fee, the network fees are fairly distributed among customers who receive and customers who send.

No fee applies when receiving Ethereum, however, and no fee applies when receiving or sending Bitcoin to the email address or mobile number of another Luno client.

Wallet security

While Luno charges a fee to receive Bitcoin from external addresses, it also promises to keep your funds and tokens safe.

“Security, in particular safeguarding customer funds and cryptocurrency, is a major focus at Luno and the Amazon Web Services platform provides a solid, secure, and reliable base for us to build on,” said Stranex.

Stranex acknowledged that there have been some high-profile hacks of Bitcoin exchanges, which were a result of poor security.

“These didn’t happen because exchanges are inherently unsafe – they were the result of poor security from companies that weren’t committed to keep their customers money safe.”

According to Stranex, unlike most exchanges, Luno has bank-level security thanks to its experience of working with banks.

The vast majority of cryptocurrency tokens are stored in Luno’s “deep freeze” storage system. Multisignature private keys are split across vaults around the world on different continents.

“To access the funds, an attacker would need to simultaneously break into multiple of these vaults, and break through several layers of encryption and other security controls. This is virtually impossible,” said Stranex.

“To allow instant withdrawals, we maintain a multi-signature hot wallet and split the key between Luno and security leader BitGo. A hacker would have to break in both systems to access the keys.”

Stranex said sensitive customer information is also stored using strong encryption, and all its systems have extensive access controls.

“We also carry out regular financial and security audits to test the systems. Storing money in a Luno wallet is as secure as storing it in a bank,” said Stranex.

Now read: How Luno helps South Africans pay their Bitcoin tax

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Luno’s Bitcoin receive fee and security systems