Coinbase Acquires Israeli Cybersecurity Firm
In a blog post, Coinbase said that the acquisition of Unbound was part of an effort to "advance" the security of its products. Unbound Security uses a new type of cryptography dubbed "zero-knowledge proofs," which allow the exchange to move digital assets from one party to another without having to share a private key with the recipient.
Unbound Security was founded by Israeli cryptographer and entrepreneur Guy Zyskind, who previously co-founded the decentralized storage company Storj. The company has developed a new type of cryptography to replace the traditional "public-key cryptography" that is currently used in blockchain systems. Unbound Security's approach enables private transactions, which are not possible with conventional blockchain technology.
The acquisition, which follows a string of similar deals by leading cryptocurrency trading platforms, is one of the first in the industry to be made public. Unbound Security has developed a new encryption method that could help protect user data from hackers. The new security system involves splitting data into fragments and distributing them across multiple nodes scattered around the world. Each node can only access its own data fragments, which prevents hackers from getting access to the entire database of user information.
The acquisition includes Unbound's entire team, which will move to Coinbase's San Francisco headquarters. Unbound co-founders, Yuval Zalmanson and Yuval Bechar, will join Coinbase.
In a statement, Unbound CEO Tal Lev-Ami said: "We are thrilled to join forces with Coinbase and accelerate the adoption of digital assets. Our team is excited to continue building our technology and products, now with the support of a strong financial services partner, which shares our commitment to creating the most secure and user-friendly solutions for storing digital assets."
The acquisition is part of a wider trend of security companies collecting digital assets to build products, including blockchain network security and privacy software. The San Francisco-based company said that it is a natural next step for its Custody business, which it launched in June 2018. Custody lets institutional investors store digital assets on Coinbase's regulated platform.
The acquisition is the latest in a string of moves by the San Francisco-based exchange, which has raised $225 million in venture capital. Coinbase is one of a number of companies that have acquired Israeli blockchain startups, including Bancor, which raised $150 million in an initial coin offering (ICO) last year.
The acquisition is part of Coinbase's effort to expand its services into the world of "crypto securities," where it will face competition from well-funded competitors such as Circle and Polychain Capital.
The price of the acquisition has not been disclosed.
The firm, which has received $3.5 million from investors to date, is not the first company to use this technology: It was originally developed at MIT and Columbia University, and the US National Security Agency has reportedly been using it for over a decade.