Custody

Coinbase Custody: 

In Q3 2019, XAPO’s institutional custody was purchased by Coinbase. Sol Strategies’ account with XAPO was transitioned to Coinbase Custody.

Coinbase Custody account opened September 23, 2019.

In 2023, Coinbase combined its “Custody” product into its “Prime” brokerage product – with a single interface for both products. Sol Strategies only uses the Custody features of the prime platform.

About the Custodian

Coinbase Custody is a US-based company, founded in 2012, which provides various services in the cryptocurrency sector. Coinbase Custody formed Coinbase Trust Company, LLC, with offices in New York, California and the UK.

Coinbase Custody Regulatory Oversight

  • Regulated by the New York Department of Financial Services (NYDFS), and operate as an independently capitalized entity, Coinbase Trust Company, LLC.
  • Coinbase Custody is a fiduciary under § 100 of the New York Banking Law and is licensed to custody its clients’ digital assets in trust on their behalf.
  • As a New York state-chartered trust held to the same fiduciary standards as national banks, Coinbase Custody is a qualified custodian for purposes of § 206(4)-2(d)(6) of the Advisers Act, commonly called the custody role.

Negative News

  • There are no known instances of significant negative news with respect to Coinbase Custody, or its parent Coinbase Inc.

Insurance

  • Coinbase Custody carries an annually renewed commercial crime policy that carries a $255M USD limit (per-incident and overall), with Coinbase Global as the named insured.

 

Solana Staking Security and Storage Custody

Network Topology

The Solana network is a decentralized blockchain network. Similar to Bitcoin, it exists as a set of “nodes”, connected in a peer to peer network. These “nodes” are server instances running a compatible version of the Solana software.

Each node in the Solana network plays a crucial role in maintaining the integrity and functionality of the blockchain. These nodes can be categorized into different types based on their responsibilities:

  1. Validator Nodes: These are the backbone of the Solana network. They participate in the consensus mechanism, validate transactions, and produce new blocks. Validator nodes are responsible for processing transactions and maintaining the state of the blockchain.
  2. RPC (Remote Procedure Call) Nodes: These nodes serve as access points for users and applications to interact with the Solana blockchain. They don’t participate in consensus but provide an interface for submitting transactions and querying blockchain data.
  3. Archival Nodes: These nodes store the entire history of the blockchain, allowing for historical data queries and auditing.

The Solana network employs a unique consensus mechanism called Proof of History (PoH) in conjunction with Proof of Stake (PoS). This innovative approach allows for high throughput and low latency, enabling the network to process thousands of transactions per second.

One distinctive feature of Solana’s network topology is its use of a gossip protocol. This protocol allows nodes to efficiently discover and communicate with each other, ensuring that information is rapidly propagated throughout the network.

Delegation & Staking

Solana operates on a Proof of Stake consensus protocol. Holders of SOL are able to delegate to a validator of their choosing. When SOL holders delegate their tokens to a validator, they participate in the network’s security and operations without running a validator node themselves. This process, known as staking, has several key aspects:

  1. Rewards: Delegators earn rewards proportional to their stake. These rewards are distributed at the end of each epoch, which typically lasts 2-3 days on Solana.
  2. Validator Selection: Delegators can choose any active validator. Factors to consider include the validator’s commission (the percentage of rewards they keep), performance, and total stake.
  3. Lockup Period: When staking, SOL is subject to a warm-up and cool-down period. It takes about 1 epoch to start earning rewards after a delegation.
  4. Risk: Delegators cannot lose their staked SOL due to validator misbehavior. If a validator performs poorly or goes offline, delegators may not earn rewards for that epoch. The original staked amount is always safe and not at risk.
  5. No Custody Transfer: Importantly, delegated SOL remains in the control of the delegator. Validators never take custody of the delegated funds.

Custody Solutions

Solana is supported by Coinbase Custody, Sol Strategies primary custody provider. It is also supported by many prominent competitive Custodians, including Gemini, Fireblocks, Copper and more.

Importantly, Coinbase Custody supports delegation of SOL to any validator node. As a result, SOL held in Coinbase Custody can maintain its operational security and insurance, while also benefiting from staking rewards.

Validator Hosting

Sol Strategies chooses to run a Validator. The benefits of hosting a validator are:

  1. Known counterparty: Sol Strategies knows its staking counterparty, which is itself. This eliminates counterparty risk associated with delegating to unknown third parties.
  2. Control over fees: As a validator, Sol Strategies can set its own commission rate, balancing between attracting delegators and maximizing returns. This allows for dynamic fee adjustment based on market conditions and operational costs.
  3. Ability to earn from delegations: By running a reliable validator, Sol Strategies can attract SOL delegations from other token holders, potentially earning additional rewards beyond just staking its own holdings.
  4. Network participation: Running a validator allows direct participation in the Solana network’s consensus and governance processes, giving Sol Strategies a voice in the ecosystem’s development.

Sol Strategies validator is run under contract by a third party vendor, further information on this vendor can be provided by request.

  • Identity CYPhera3uWNjrkcYe5aixQvn1SKBS6fzpv7VjJGsdYim
  • Vote Account punK4RDD3pFbcum79ACHatYPLLE1hr5UNnQVUGNfeyP

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