Coinbase's Cold Storage Key Generation Was a Faraday Cage Frenzy

Introduction

Coinbase, a leading cryptocurrency exchange, has revealed how it once guarded cold storage keys with Faraday cages.

Background

The company used to generate keys in Faraday-caged tents in San Francisco, combining hardware security with unpredictable location changes to protect against electromagnetic side-channel attacks.

Hardware Security

Coinbase used two factory-sealed laptops for the job, one for generating keys and one for printing. Both machines were air-gapped, meaning they never touched a network.

Coin Toss

The laptops were chosen by flipping a coin, ensuring nobody knew in advance which machine would be used.

Destruction

Once the keys existed, the hardware stopped being an asset and became a liability. So, Coinbase physically destroyed all of it, including the laptops and printers.

Shamir's Secret Sharing

The keys themselves were then split using Shamir's secret sharing, ensuring multiple participants had to cooperate to reconstruct a key, so no single insider could walk off with customer funds.

Conclusion

For customers, the story is a reminder that cold storage is only as strong as the moment the keys are born. If a key is compromised at creation, every later safeguard protects something that is already exposed.