why Multi-sig powered lending offers incredible security

why Multi-sig powered lending offers incredible security

George is in a mood for  holiday and is looking to get a loan against his crypto

George has two options

He can go to a centralized exchange and deposit his crypto and get a loan

Or he can use a DeFi protocol to borrow stable coins

There are security issues with both the options

In the CeFi option the exchange can lose his collateral Or worse rehypotheticate to a third party  like what  Celsius are many other CeFi lenders did fora  juicy yield
On the other hand Defi is not secure as well

There are smart contract risks , Oracle hacks , Bridge hacks and so much more

Now there's a 3rd option

Multi sig backed lending

In  2/3 multisig backed lending which valuete uses, 3 parties control the collateral while at least 2 people are required to  move the funds

Hence only multisig  backed lending offers true decentralisation

How it works ?

The borrower  ( show george ) , the lender ( show a rich person with dollars )and valuete platform hold 3 keys of which two people need to sign together to move funds

Why is this set up incredibly secure ??

multisig  wallets offer  ultimate transparency as the funds never move during the entire term of loan

As funds don't move during the loan term this also eliminates the possibility of rehypothetication which was the reason for collapse of Celsius and other lenders

The other incredibly property of multisig wallets is transaction visibility

Simply by looking at the transaction hash one can decipher which two parties were involved in moving the collateral which helps in dispute resolution

hacking multisig wallets is incredibly harder than say hacking centralized exchanges

As you need to comprise two keys which are geographically distinct and with differing parties

So any serious hackers would try to breach a centralized entity first

Now let's look at some edge cases

What happens if valuete key is breached ?

Valuete key is placed in a high security location never to be used except for dispute resolution.

Even in an extremely unlikely event where valuete key gets breached  and a second key gets hacked hackers can only get away with collateral of a single loan

Post this Valuete loses credibility and all other customers can simply close their loans and get back their collateral with their borrower and lender keys.

Now you know , why Multisig powered lending offers an incredible upgrade in security for crypto backed lending.

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