A successful funding roundup has been announced by alternative crypto wallet startup Chypherock, raising $1 million through various interesting investors, one of which is Polygon co-founder Sandeep Nailwal. The hype? The company’s method of storing a seed phrase may be one of the most secure and foolproof just yet.
Seed Phrase Basics
Self-custody wallets serve both roles of being a client and banker in a single user. The obvious downside is that whatever happens to it is the owner’s sole responsibility. In case the wallet is lost, a seed phrase can be used, which is a randomly generated group of words acting as a master password. With a seed phrase, you can recover crypto assets regardless of the level of access loss.
But, this too is a risk, since the seed phrase itself can be lost, or worse, can be stolen by malicious third parties. The ideal solution then, is to provide a seed phrase that would never be lost to a user, but is secure enough that it cannot be stolen directly.
Implementation of such a concept has eluded many other startups, but Cypherock seems to have developed a more straightforward solution: just “eliminate” the seed phrase altogether.
The World’s Safest Crypto Hardware Wallet?
That… is at least according to the company’s own advertising statements. In place of the seed phrase and private keys, are four different encrypted near-field communication (NFC) cards. To authorize the transaction, you physically need to tap the cards into the wallet, much like using any cash card. Or more thematically, similar to swiping a phone on a cashier that supports NFC features.
Think of it as a crypto ATM card, but since you are your own banker with a self-custody wallet, you access the “safe” that represents your digital funds. As expected of a service that uses the same updated transacting technology, the same security hardware for major banks is also used, albeit altered with custom software, and supported by Cypherock’s internal infrastructure.
One critical reassuring factor to the company is that even in the event that their system is compromised, no breach of funds can occur. This is because its services are all cold wallet-specific: physical hardware with scrambled information to access hardware-exclusive cryptocurrency. This also means that the NFC cards cannot be upgraded once given to users, however, even Cypherock X1 as a feature itself can be updated to support new cryptocurrencies.
Survive and Thrive, or at Least Pass On
The successful funding round for Cypherock was announced by the end of December 2022. Notable investors include Stefan George and his co-founded company Gnosis, Liminal founder Mahin Gupta, Sandeep Nailwal, also co-founder of another tech entertainment site, Polygon, and of course Orange DAO, the entity built to invest in promising crypto-related startups.
At this point in time, the focus of the company is still on development and marketing, and so most of the funds will be allocated there. Other endeavors also include adding more tokens and supporting more NFTs, as well as contributing to multi-part computation (MPC) ideas, or the sharing of information across what would otherwise have been completely private outlets.
The company also revealed that its team is currently working on a mobile app that can functionally replace users’ cold storage wallets. Given that the technology being used is all open source, it is possible that during the app’s introduction and implementation, a few other groups might be able to develop another app to officially use the NFC cards.
If Cypherock pushes through its endgame, it will proceed to develop and provide crypto inheritance services. Think of Sarcophagus (the crypto company), but instead of automated transfer per conditional fulfillment, the assets will be transferred through a more “by-the-will” method.
Double-Edged Swords in Self-Custody
If you are ever interested in Cypherock, remember that the seed phrase is still technically accessible through tapping the NFC card on your cold wallet and using a PIN to authorize transfers. Similarly, two of the four physical NFC cards could also be tapped on a new wallet to restore lost assets, so it is in all interested users’ best interest never to store all four in the same place.