Where were the 21 million prefarm chia coins moved to?

The recent news has stirred up the community a bit. Developers announced the transfer of all prefarm coins of Chia, and this is not a little and not a little 21 million XCH to four specially created wallets for storage.

Why create new wallets? What’s wrong with the old ones?

Existing web3 data storage solutions are based on simple contracts with multiple signatures, from which funds can be withdrawn in the event of a minor security breach. We knew we could have done better in this regard.

The Chia data storage solution uses a combination of special equipment and cutting-edge Chialisp to create the most secure wallet in the crypto world. In this article, we will discuss both hardware and software used to protect prefarm funds. We will also give an example of how powerful this solution is. Finally, we’ll show you how you can use a similar solution to protect your chia XCH tokens.

Wallets

Prefarm Chia was divided into four wallets, two in North America and two in Europe. On each of them, seven-eighths of XCH or 87.5% is stored in a cold wallet, and one-eighth of 12.5% is stored in a hot wallet. These wallets use the same storage tool, but with different settings, which we will describe later in this topic.

Equipment

The company Chia Network Inc. strategically placed several computers, called hardware Security Modules Hardware Security Modules (HSMs), in North America and Europe. These computers are surrounded by by Faraday cells, there are no antennas on their motherboards and they will never be able to connect to the internet. Each HSMs contains a private key that can authorize withdrawals and other actions with a pre-account (although multiple signatures are required).

Since these computers are always offline, remote signing is not possible. Instead, a person has to scan a QR code inside a secure HSMs “storage”. Then a digital signature is generated for a specific transaction, which can be safely removed from the repository. If a signed transaction is modified, it automatically becomes invalid. If the QR code or the device containing the signature is stolen, the theft of the preset will not be possible. In fact, even if all but one of the HSMs are compromised, the preload will still be restored. There is no single point of failure in this solution.

Software

Prefarm hot and cold wallets allow you to perform three main actions that will be discussed individually:

• Withdrawal of funds
• Re-entering
• Raising the lock level

Of the values discussed here, only singleton storage can be changed. Most key signatures are required to change the functions. All values are guaranteed to be immutable using the protected and verifiable Chialisp code that is included in the storage solution.

All the settings described here are applicable to cold wallets. Hot wallets will be described later.

Output

Three of the five private keys must be signed for any withdrawal of funds. (This is known as «Checking Multi-Signature» — m-of-n multisig.) However, before any withdrawal can be initiated, at least 30 days must have passed since the last action was performed.

If the transaction was signed with three keys and at least 30 days have passed, the withdrawal amount will be blocked in a new coin called drop coin, without the participation of a third party for another 90 days. During this time, a clawback (refund to the prefarm wallet) is possible. In order for this to happen, three keys must sign the reverse transaction.

After 90 days, if the coins have not been returned, the withdrawal can be completed. The coins must be withdrawn to the address specified in the initial transaction. A hacker cannot change this address. Since this address cannot be changed, anyone can complete this transaction.

Rekey

As a result of the rekey process, a completely new set of private keys will be created to manage the prefarm storage. The total number of keys can also be changed, as well as the number of keys required to confirm the withdrawal of funds. Re-entering the — rekey key will be executed, if any of the original keys are lost, stolen or copied.

In order to start the rekey process, a strict set of rules must be followed. In a normal situation, a signature of three source keys is required to work with the key. In addition, at least 15 days must have passed since the last action was performed in the HSMs token store.

Slow rekey is also possible if less than three keys are signed. In this case, a time penalty is imposed, the duration of which depends on the number of keys used. For example, if only one signature is received, then 90 days should have passed since the last prefarm action.

Given the number of signatures received, if enough time has passed, a new coin drop coin with a zero value will be created. This coin is blocked for a 30-day period during which a refund is possible (cancellation of the rekey process). In order for this to happen, the same number of keys that originally signed the re-key must sign the clawback transaction.

If the drop coin has not been returned after 30 days, the rekey action may be completed. The keys were specified during rekey initialization, so they automatically become the new keys needed to access the prefarm vault and coins. Just like when withdrawing funds, anyone can complete the transaction rekey.

Increasing the blocking level

Currently, three signatures are required to withdraw funds from prefarm cold wallets. This is known as the “lock level”. This number can be increased if four signatures are received. The effect is instantaneous – all future withdrawals require four signatures immediately – and this invalidates any failed attempts to re-enter the key. This action increases the security of the vault, making it difficult to initiate withdrawals. The lock level may even be increased again, which will require signatures from all five keys to initiate all future withdrawals.

Hot Wallets—Hot Wallet

Two hot wallets that protect one-eighth of the prefarm follow the same basic rules described above, but with different settings. Each of them has three shared keys stored in the HSM, two of which must be signed in order to withdraw funds. In addition, they have a 24-hour refund period for transactions, a 1-hour withdrawal lock, a 24-hour re-key lock, a 24-hour re-key lock, and a 48-hour penalty for slowing down the re-key.

Security example

The actions described above provide an unprecedented level of security. And to show how committed we are to this solution, we have put all our preliminary preparation into it.

If something goes wrong, we have several mitigation plans. For example, if an attacker managed to get a copy of four (!) of the five keys of a cold wallet, he will most likely try to empty this wallet. We would refund the payment and increase the blocking level to five (thereby negating the possibility of future withdrawal attempts). Then we would re-enter the rekey process, after which the hacker’s keys become useless. At the same time, no funds will be lost.

Different solutions are possible for different types of attacks. In all cases, temporary lockdowns will give Chia Network Inc enough time to make a plan to minimize or prevent any damage.

Custody Tool

Along with blocking our prefarm, we are also releasing a tool that made this solution possible Custody Tool. That’s right – you can use the same storage tool to lock your XCH! At the moment, this tool only works on the command line, and it probably has more bells and whistles than most people need. However, we still believe that it will be invaluable for those who have been waiting for a reliable way to block their funds.

Additional resources:

• Detailed description of the tool
• Custody Tool User Manual