Through the Velas Network users gain access to decentralized services, delegating the security of his passwords, keys or seed-phrases to segmentation algorithms and validators that are interested in data security. Most important, this information will be distributed over the network and not available to any of its participants.
An account creation is not the only action users are often faced with, but also saving the generated seed-phrase, and reentering this for security validation. It is in the user’s interest from a technical standpoint, as wallet data can be restored only with a unique and secure seed-phrase and its loss means losing the assets forever. Your seed-phrase are your crypto — lose it, lost your crypto.
Users are, therefore, fully responsible for ensuring the security of their digital assets in addition to owning and operating assets individually. Those who own an individual seed-phrase or private key have access to the balances behind them.
This approach is considered the safest on the market, globally, as there is no need to transfer keys to a third party or a centralized service (such as hosting them in the Cloud or in a database somewhere), which major disadvantages include:
- No control over your own assets — the service keeps private keys, meaning if something happens to the access of this service, such as an employee breach or external security breach, your private keys are at significant risk of being compromised.
- Hacking and hacker attacks — there exist almost no exchanges that haven’t been subject to attack and stealing of users’ funds in one form or another. If you don’t hold your keys personally, you risk someone else gaining access through a wide variety of means.
- Changes in service conditions — at any moment, a service may impose restrictions or limits on services, including the deposit/withdrawal of funds from your addresses. Again, if you don’t personally hold your keys, you are at increased risk of losing access to them.
- Account blocking and freezing — upon request of regulatory bodies or police/ security services, the service is able to limit user access to the platform and therefore their stored crypto.
- No anonymity — according to FATF rules, the service must collect user data and provide information to regulators upon request. KYC has its perks, but to many, it is a key factor to avoid.
For centralized services, the main motivation to save user data is gaining profit for the provided products. For decentralized services, the user stays one-on-one with the newly available technology and independently decides how to manage and secure their own assets.
The conclusion, therefore, is:
The highest form of safety = total liability.
Delegable safety = motivating the responsible.
As a new solution, Velas offers the possibility to delegate the responsibility for security to existing market participants (such as Google or Apple), that have already provided access to services, but without the necessity to inform what they are responsible for specifically. In this case, passwords and keys will be segmented and stored on servers, with the ability to verify and transfer data on proof of ownership.
We call this system the Velas Vault, where a part of information is useless without consensus bringing all the combining parts together. Also, it is important to note that this system is sufficiently decentralized and implements various protection mechanisms to prevent attacks aimed at collecting user data and gaining access to user balances.
Since the Velas blockchain is based on Delegate Proof-of-Stake consensus, a pool of validators is responsible for maintaining the functionality and security of the network. The ability to become a validator depends on the number of staked coins, and the reward directly depends on the validator activity in the network. In the case of default or malicious actions, the validator may lose their staked assets.
To implement our Velas Vault system, the validators will be assigned a new mission — transfer and storage of (Shamir’s Secret Sharing) parts of users’ private keys (RZL MPC algorithm). Validators will receive additional rewards from transactions that are generated upon the user’s request, as well as a commission for data storage, if the user hasn’t made any transactions for a long duration.
Thus, the user will be able to authorize in any convenient way in the Velas network and gain access to decentralized services, delegating the security of his passwords, keys or seed-phrases to verified segmentation algorithms and validators that are interested in data security. Most important, this information will be distributed over the network and not available to any of its participants.
Potential usage options on hand are:
- Accelerating bitcoin transactions by creating tokenized assets in the Velas blockchain.
- Storing digital assets of users with different types of authorization, including Google Authentication, Apple Authentication and more.
- Storing passwords from other services with access through Velas Account authorization.
In addition to our Velas Passwordless solutions, we plan to implement the ability of accelerating the circulation of BTC and ETH without using centralized exchanges and provide opportunities to exchange BTC and ETH to other currencies seemlessly.
The process for the example of Bitcoin is as follows:
- User N1 has Bitcoin in the bitcoin network.
- User want to accelerate the circulation of his Bitcoin through the Velas Blockchain functionality.
- User N1 sends his Bitcoins to his vBTC address.
- After adding vBTC, user N1 sends coins via Velas Blockchain to another user N2, who also has their own vBTC address.
- The other user sends coins from the vBTC address to the BTC address.
- Validators verify the transaction identity and create a transaction in the bitcoin network.
Users will have the following assets available in their Velas wallet:
VLX — our main token.
vBTC — tokenized Bitcoin.
vETH — tokenized Ethereum.
vZEC — tokenized ZCash.
Since these tokenized assets are Velas tokens, the entire ecosystem can provide DEX and other DeFi tools for our investors, expanding user options monumentally.
Our main goal is to simplify access to decentralized services and to ensure the security of our customer’s data, providing the opportunity to interact with the world of blockchain technology without needing a deep dive into unnecessary or risk-enhancing technical aspects.