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Custody Security Architecture: Multi-Sig, HSMs, and Defense in Depth

A detailed examination of enterprise-grade custody solutions: key management, multi-signature requirements, and layered security.

19 min read
January 2, 2025
Enterprise custody of digital assets requires security architecture that exceeds traditional banking standards. The combination of bearer asset properties (possession equals ownership) and irreversible transactions creates unique risks that demand defense-in-depth approaches. This guide examines the security architecture underlying institutional-grade custody: multi-signature requirements, hardware security modules, key ceremony procedures, and layered access controls.

Defense in Depth

No single security control is sufficient for custodying significant digital assets. Defense in depth layers multiple independent controls so that breach of any single layer does not compromise assets. The security stack includes: physical security, network isolation, access controls, multi-party computation, and monitoring/alerting.

  • Physical: HSMs in geographically distributed, secure facilities
  • Network: Air-gapped signing infrastructure, no internet exposure
  • Access: Role-based access with separation of duties
  • Cryptographic: Multi-signature with distributed key management
  • Operational: Dual control procedures, time-locked transactions

Multi-Signature Architecture

GRAIN treasury wallets use 3-of-5 multi-signature configuration. Five key holders in different geographic locations must provide three signatures for any transaction. This prevents single points of failure (compromised individual, lost key) while remaining operationally practical.

3-of-5
Multi-Sig Configuration
5
Geographic Locations
24/7
Security Monitoring

Insurance Coverage

GRAIN maintains comprehensive crime insurance covering theft, fraud, and employee dishonesty. Coverage limits are calibrated to custody amounts and reviewed quarterly. Policy details available under NDA for enterprise customers.

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