In the past years, centralized exchanges and their users suffered significant losses from improper management of assets. These exchanges always use a centralized wallet to manage all users’ assets, which hackers can easily target and therefore prone to be the “central point of failure.”
Once the private key of this centralized wallet gets leaked, users’ digital assets will be instantly at stake: over five hacking incidents aiming at centralized exchange occurred solely in the year 2020, with a staggering $286,933,760 total asset loss. Also, administrators of the exchange could take advantage of users’ assets to make risky or illegal investments or speculations solely in their interests.
Therefore, there has always been a fundamental trust gap between users and exchanges. For years, people have taken various measures to avoid these unfortunate events, but none entirely solves the problem. This is why we are so proud today to introduce the first on-chain centralized asset management mechanism, which we call the Centralized Asset Management(CAM). By applying smart contracts on the aelf blockchain, aelf CAM removes these risks on a fundamental level.
How does the system work?
The aelf CAM is essentially a smart contract on the aelf blockchain. It creates a master address for any given exchange, which will be governed by a CAM contract instead of the exchange itself or anyone else.
Under this CAM protection, an exchange can only make basic transactions. Neither could it control user’s assets, nor can it vote for certain purposes, etc.
A user of the exchange will receive a virtual address from the CAM, and the user can then check their balance records through this address to assure the security of their assets.
Under a CAM contract, the exchange can also assign several asset managers who decide whether a token transfer can pass through.
Often, a transaction call for more than one manager to confirm, and if a transaction amount is large enough, it will face much stricter scrutinization by managers.
How can CAM benefit exchanges and users?
The addresses of exchanges are controlled by CAM smart contract, which means it is impossible for any hacker to make transactions using these addresses.
The exchange itself does not have super admin authority to control all the addresses, prohibiting the exchange from using any user asset to play with fire.
Users can check their asset’s transaction record, which makes the exchange covered by aelf CAM much more reliable.
Any transactions through the exchange need to obtain managers’ permission, which decentralizes the power, mitigates the asset risk significantly and prevents potential piracy to the greatest possible extent.
Why is aelf capable of supporting CAM?
We built the entire aelf blockchain from scratch. It has a fully flexible modular architecture to accommodate all business implementations by customizing aelf’s technology suite. Powered by AEDPoS, aelf also has great transaction speed and extraordinary execution performance thanks to its clustering cloud computing infrastructures all over the world.
Thus, by leveraging its technical superiority, aelf blockchain can host CAM on its base architecture and eligibilize CAM to manage a tremendous amount of user’s assets securely.
By contrast, most existing blockchain networks do not bear this degree of flexibility and performance on the architecture level, thus unsuitable to host such a demanding yet reliability-first application like CAM.
We believe with a decentralized security mechanism, users can trust the centralized exchanges once more.
The full CAM video is here: https://www.youtube.com/watch?v=hsv-BvE15Sc