Why Disaster Recovery for private keys is essential
As the use of digital assets continues to grow in popularity, it's becoming increasingly important for institutions to prioritise the safekeeping of private key materials. These materials are critical for accessing and managing digital assets. Their loss or compromise can have severe consequences; sayings like ‘not your key, not your crypto’ are commonplace in the industry and instil fear in those who hear them. That's why institutions need a robust disaster recovery plan for their private key materials if the worst happens.
So, what is Disaster Recovery?
Disaster recovery (DR) is the process of restoring and protecting data and systems in the event of a disaster, such as a cyber-attack or natural disaster. In the context of private key materials, disaster recovery involves having access to multiple backups of the key materials stored in various locations and having procedures in place for quickly accessing and restoring the key materials if disaster strikes.
Why does your business need Disaster Recovery?
There are several reasons why businesses need to prioritise disaster recovery for their private key materials:
- Financial loss: The loss or theft of private key materials can result in losing access to digital assets, which can have significant financial implications for a business. DR can minimise the potential for financial loss by ensuring that key materials can be quickly restored following a disaster.
- Reputational damage: A cyber-attack or data breach can damage an institution's reputation and lead to a loss of trust from clients and stakeholders. Having a DR plan in place demonstrates that an institution takes the security of its clients' assets seriously and has the necessary measures to protect them.
- Compliance: Many jurisdictions have regulations requiring institutions to have disaster recovery plans. Failing to comply with these regulations can result in fines and other penalties. As the crypto market moves towards regulation, businesses must get ahead of the game.
A robust disaster recovery plan can minimise the potential for financial loss, reputational damage, and non-compliance. By leveraging disaster recovery services, institutions can protect their digital assets against potential disasters.
Third-party Disaster Recovery
Coincover’s disaster recovery service helps businesses to implement robust procedures for securing private key materials. Using a trusted third-party in the management of multi-sig and MPC (multi-party computation) key materials is essential for several reasons:
- Security: A trusted third-party like Coincover can provide added protection for private key materials by storing them in secure, isolated, encrypted environments. This can help protect against threats such as theft or natural disasters and ensure that the key materials are not compromised. Coincover also implements advanced security measures, such as multi-factor authentication, to further protect against unauthorised access.
- Compliance: A third-party provider can also help ensure compliance with regulatory requirements. Many jurisdictions have specific regulations regarding storing and managing private key materials, and a third-party provider can help ensure that institutions comply with these regulations.
- Risk management: By using a third-party provider, institutions can transfer some of the risk associated with managing private key materials to a professional and reputable provider. This can help minimise the potential for financial loss if there is a disaster or data breach.
- Scalability: For institutions with many users, managing and securely storing all the private key materials can be challenging. Third-party providers can offer scalable solutions that can accommodate institutions' growing needs.
- Redundancy: A trusted third-party can provide a backup of the private key, thus ensuring that in case of a disaster, the key can be recovered, and transactions can be made.
- Expertise: Third-party providers like Coincover specialise in providing secure key management solutions and have a team of experts with the knowledge and experience to handle these complex infrastructures. This expertise can help businesses ensure that their private key materials are managed in a secure and compliant manner.
If the time isn’t right to use a trusted third-party service like Coincover, there are additional steps you can take to mitigate the risks associated with private keys, including:
- Create multiple copies of private key materials: This includes creating physical copies, such as paper wallets, and digital copies, such as hardware wallets. The copies should be stored in various locations, such as in a secure off-site location or with an encrypted third-party storage provider.
- Use multi-sig: A multi-sig approach requires multiple signatures to authorise a transaction and is more secure. Implementing this approach can provide an added layer of security by requiring multiple people to authorise a transaction.
- Implement access controls: Limit the number of people who have access to private key materials and use two-factor authentication to add an extra layer of security.
- Regularly test your internal disaster recovery plans: Regularly testing plans ensures that they are up-to-date and that key materials can be quickly restored after a disaster.
Overall, using a trusted third-party provides several benefits for businesses. Added security, compliance, risk management, scalability and expertise all help ensure that digital assets are protected against disasters and minimise the potential for loss.
Better understand how Disaster Recovery could support you and your clients, get in touch.