How to keep 700 Bitcoin a day safe

Luno recently told MyBroadband it was trading over 700 Bitcoin per day during November.

During the period, the exchange also launched support for Ethereum – allowing customers to purchase and sell Ethereum for rand.

As Bitcoin and Ethereum run on separate Blockchains, and trading volumes are growing as the currencies gain in popularity, Luno has to ensure it keeps its systems secure and user-friendly.

The exchange offers users a wallet service to store their Bitcoin and Ethereum, but does not provide customers with their own private keys.

In this way, it works more like a traditional bank than a personal decentralised wallet.

Luno’s Werner van Rooyen said the same security principles apply to its Ethereum and Bitcoin wallets, which includes cold-storage wallets and multi-signature keys.

Blockchain basics

Both the Bitcoin and Ethereum blockchains are built on the basis of public-key cryptography, in which each node or user on the network is given their own public and private key.

These keys are usually long alphanumeric strings and are used to verify your identity on the blockchain’s public ledger.

Your public key is your address, which users can send cryptocurrency to.

Your private key gives you access to your wallet and verifies your actions on the blockchain. Your private key is also used as a digital signature to sign transactions, send data, and interact with the ledger.

If your private key is compromised, your wallet and funds are in danger. If you lose your private key, you cannot access your funds.

Luno does not provide customers with the private key to their wallets, and instead it stores them securely in “deep freeze” vaults.

The keys also require multiple signatures to be used, and only certain individuals have access to the vaults.

Cold and hot

As Luno functions as an exchange and wallet provider, customers require quick access to their funds to trade.

For this reason, Luno uses a combination of cold-storage wallets and a hot wallet.

Cold storage means the private keys are disconnected from the Internet and require physical intervention to interact with, while a hot wallet is constantly connected to the blockchain.

A balance of funds is maintained in Luno’s hot wallet to provide liquidity – giving customers access to their funds while maintaining security.

The only way to spend Bitcoin or Ethereum from Luno’s hot wallet is if Luno and its co-singing partner service authorise the transaction using multi-signature keys.

The co-signing partner used by Luno also offers additional security measures like daily and lifetime key spend limits.

Luno further recommends that customers implement two-factor authentication on their accounts as a user-side safety measure.