By Vishal Kankani, Multicoin; Compiled: Pine Snow, Golden Finance
Today, we are proud to announce our investment in Squads Labs, a core contributor to Squads Protocol, the leading multisig solution on Solana. Their latest round of $5.7 million brings Squad’s total funding to date to $12.5 million.
We first invested in Squads in late 2021, and since then it has grown to become a powerful force in the Solana ecosystem, and we believe it is the best multi-signature solution for institutional traders, cryptocurrency pro users, and developers on Solana.
Evolution of financial custody
No matter how technology evolves, the need for hosting will always be there. Since the gold bankers of the 17th century, businesses have relied on banks to hold their assets in custody; However, as the recent collapse of Silicon Valley banks demonstrates, banks still have inherent risks of inadequacy, even after centuries of development.
In addition to simple custody, Wall Street relies on a complex network of clearing and settlement layers. Until recently, this process was a physical one, culminating in the Wall Street paperwork crisis of the 60s of the 20th century. In response to this crisis, multiple entities were created, which later evolved into DTCC, which digitized securities and became the central hub for all clearing and settlement services. However, although the execution time of electronic transactions has been reduced to seconds, settlement is still measured in days.
After the 2008 global financial crisis, escrow services were developed. Regulation led to the merger of the main custodian banks (already oligopolies). As of the end of June 2022, the four largest custodian banks had a total of $136.6 trillion in assets under management. Modern custodian banks provide services that are not only pure custody, they also provide fund management, securities lending and other services, which often create internal conflicts of interest. The concentration of these assets, combined with emerging conflicts of interest, creates new forms of risk. A practical example is the hidden markup dispute between BNY Mellon and State Street, which are the top two custodian banks in the world.
Blockchain represents the next stage of evolution, and it is the best combination of digitization and bearer tools. It can host digital assets locally, facilitate instant global payment settlement, realize real-time settlement of transactions, and greatly reduce counterparty risk. In addition, smart contracts can not only optimize logistics operations, but also save the financial industry billions of dollars, as published by multiple institutes. Therefore, we believe that there will be real-world assets tokenized in the future. We’re already seeing a trend in this – more than $1 billion in notional private credit and U.S. Treasuries are already emerging on the blockchain.
But being your own custodian is difficult and creates a single point of failure. To solve this problem, regulation must be distributed throughout the organization and allow multiple parties to exercise power in a sovereign and programmable manner. Therefore, the end state of the custody evolution we envision is a future where organizations can store and manage their assets through multisig wallets.
Solana Multisig Standard
As cryptocurrencies mature, institutional investors and internet-native organizations need a way to manage their assets. This is where multisig wallets (aka multisig) come into play. In contrast to simple cryptocurrency wallets that require only one party to sign a transaction, multisig wallets require multiple parties to sign a transaction.
Launched in February 2022, Squads was one of the first multisig in the Solana ecosystem. Since then, Solana’s investors and builders have quickly recognized it as a common standard.
Today, there are more than 100 teams, including well-known teams such as Helium, Hivemapper, Jito, Drift, Marginfi, Backpack, Jupiter, Pyth, Tensor, and others, relying on Squads (v3) to coordinate teams and pool assets (valued at around $500 million at the time of writing). The Squads (v3) codebase has been rigorously tested in the market for 13 months, undergone 4 independent audits, and most importantly, has been formally validated.
Traditional companies have refined access control to empower specific employees to handle money transfers in a variety of situations. For internet-native organizations to achieve meaningful scale, they need similar controls.
On top of the Squads protocol, Squads builds a powerful, feature-rich platform that provides teams with a set of project management tools with team permissions. Developers can use Squads as an escalation privilege for their programs, eliminating the risk of key figures and reducing the risk of malicious code entering the system. It also gives them financial management control, making it easy to store and distribute grants, manage fundraising assets, revenue streams, liquidity mining rewards, and more.
What happens next? **
Earlier this week, Squads made its first major upgrade to the Squads platform and introduced several new products that make it even more powerful than before.
SquadsX
In addition to its desktop and mobile interfaces, Squads now has its own web extension wallet, SquadsX. This is Solana’s first multisig browser extension wallet!
Designed for teams and institutions, SquadsX enables teams to interact with decentralized applications and DeFi for the first time while still providing enterprise-grade security. SquadsX solves one of the biggest problems with multisig (lack of availability of DeFi) and supports new group management activities such as liquidity provisioning, lending, and on-chain transactions, all directly from Squads multisig.
Squads (v4)
In addition to SquadsX, Squads has also released a major upgrade to the protocol, “Squads v4”. Squads (v4) has been audited by Neodyme, OtterSec and Trail of Bits, and formal validation of OtterSec and Certora is currently underway. Squads expects that the formally validated and rigorously vetted Squads (v4) codebase will be made unmodifiable by the end of November 2023. Squads (v4) has several new killer enterprise features, some of which we’ve highlighted below:
- Time locking – Squads (v4) introduces the interval between program upgrade approval and on-chain execution. Timelocking increases the chances of finding bugs before new code goes into production.
Roles and permissions – Squads (v4) provides enhanced accounting and expense capabilities across multiple addresses. Permissions include spending limits and no-threshold withdrawals.
- Fee Repeater – Squads (v4) also introduces “Fee Repeater” to enable multisig wallets to pay all Squads-related gas fees. Once activated, team members can sign transactions with zero SOL balances, simplifying operations and allowing dapps to incur gas fees.
- Large-scale payments – Most crypto-native startups have multiple employees and contractors, just like traditional organizations. Squads (v4) introduces the ability to perform bulk payments. This is a very important feature.
- Support for Address Lookup Form (ALT) – Each Solana transaction needs to list each address that interacts as part of the transaction. Before the advent of ALT, this list was actually capped at 32 addresses per transaction. In Squads (v4), after ALT, this number has increased to 256 addresses per transaction, which allows users to make more complex transactions.
With SquadsX and Squads (v4), the Squads team has built the infrastructure for blockchain-native hosting, and now they’re building our exciting new offering and delivering compelling revenue streams on top of that.
Running a business involves all aspects of money management, payroll, human resources, and engineering. In the crypto space, operations also include granting permissions, transaction restrictions, on-chain voting, code authority, delayed execution, and more. The average person does not interact directly with the protocol, and the reality is that in the crypto space, only a small percentage of people interact directly with the protocol. This means that there is an absolutely large market that needs to streamline business operations. We believe Squads opens the door to crypto adoption in a secure and secure way and offers some of the most attractive enterprise and institutional-grade products on the market.
Over the past 18 months, despite the bear market, the Squads team has shown unwavering focus and execution. We are excited to support Squads and help usher in a new era of internet-native infrastructure with self-custody and on-chain capital coordination."
