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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