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 the October 30 announcement shared with crypto.news, 15 million CoinDCX users will be able to retain control of their cryptocurrency assets without having to remove the funds from the platform.

Typically user funds are stored in hot and cold wallets controlled by exchanges and are often vulnerable to attacks. With the new feature, CoinDCX users will be assigned a blockchain wallet that stores funds outside of the exchange infrastructure, reducing exposure to such risks.

Users also have the option to transfer their assets back to the exchange at any time.

Additionally, 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 such as two-factor authentication and multi-party computation, acting like a “dual-key bank locker where both user and platform authorization are required to access assets,” according to CoinDCX co-founder Sumit Gupta. .

“This multi-layered security provides maximum protection for users by reducing the risk of unauthorized access,” Gupta added.

CoinDCX’s move towards self-custody comes at a time when the Indian crypto market is recovering from the $235 million WazirX attack that left around 16 million users without access to their crypto and cash assets.

The attacker managed to drain more than 45% of user funds stored in one of WazirX’s multi-signature wallets, causing the exchange to suspend all services. Since the attack, there has been a rise in calls for self-storage options, as the incident exposed the vulnerabilities of centralized storage models.

A month after the WazirX breach, CoinDCX established the ‘Crypto Investors Protection Fund’ to compensate users in case the platform falls victim to a similar situation. In addition to the initial allocation of approximately $6 million, the exchange will transfer 2% of brokerage revenue to the fund over time.