Multicoin Why invest in Squads Labs, a multi-signature solution for Solana?

Maximize Your Investment Potential with Multicoin Discover Squads Labs, the Multi-Signature Solution for Solana

Author: Vishal Kankani, Multicoin; Translation: Songxue, LianGuai

Today, we are proud to announce our investment in Squads Labs, the leading multi-signature solution Squads Protocol on Solana. Their latest round of $5.7 million funding brings Squad’s total funding to $12.5 million so far.

We first invested in Squads at the end of 2021, and since then, it has grown into a strong force in the Solana ecosystem. We believe it is the best multi-signature solution for institutional traders, cryptocurrency professionals, and developers on Solana.

The Evolution of Financial Custody

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Regardless of how technology evolves, the need for custody remains. Since the days of gold bankers in the 17th century, businesses have relied on banks to safeguard their assets. However, as the recent collapse of Silicon Valley Bank has shown, banks still have inherent risks, even after centuries of development.

In addition to simple custody, Wall Street also relies on a complex network of clearing and settlement layers. Until recently, this process was physical and reached its peak during the Wall Street paperwork crisis of the 1960s. To address this crisis, multiple entities were created, which later evolved into the DTCC, digitizing securities and becoming the central hub for all clearing and settlement services. However, despite the execution time of electronic trades being reduced to seconds, settlement still takes days.

After the global financial crisis in 2008, custodial services underwent development. Regulation led to the consolidation of major custodian banks (which were already an oligopoly). As of the end of June 2022, the four largest custodian banks manage a total of $136.6 trillion in assets. Modern custodian banks provide services beyond pure custody, such as fund management and securities lending, often creating conflicts of interest. The concentration of these assets, combined with emerging conflicts of interest, has created new forms of risk. A real-life example is the hidden markup dispute between BNY Mellon and State Street, the top two global custodian banks.

Blockchain represents the next evolutionary phase, combining digitization and anonymity. It can locally custody digital assets, facilitate instant global payment settlement, enable real-time trade settlement, and significantly reduce counterparty risk. Additionally, smart contracts can optimize logistical operations and save billions of dollars for the financial industry, as multiple research institutes have reported. Therefore, we believe that real-world assets will be tokenized in the future. We have already seen this trend – over $1 billion in nominal private loans and US Treasury bonds have appeared on the blockchain.

But being your own custodian is difficult and can cause single points of failure. To solve this problem, governance must be distributed throughout the organization, allowing multiple parties to exercise power in a sovereign and programmable way. Therefore, the ultimate state of envisioned custody evolution is that organizations can store and manage their assets through multi-signature wallets in the future.

Solana Multi-signature Standard

As cryptocurrencies mature, institutional investors and internet-native organizations need a way to manage their assets. This is where multi-signature wallets, also known as multi-sig, come into play. Compared to simple cryptocurrency wallets that only require one party to sign a transaction, multi-signature wallets require multiple parties to sign transactions.

Squads, launched in February 2022, is one of the first multi-signature implementations in the Solana ecosystem. Since then, Solana investors and builders quickly recognized it as a universal standard.

Today, there are already over 100 teams, including well-known teams such as Helium, Hivemapper, Jito, Drift, Marginfi, BackLianGuaick, Jupiter, Pyth, Tensor, and more, relying on Squads (v3) to coordinate team and treasury assets (valued at approximately $500 million at the time of writing). The Squads (v3) codebase has undergone rigorous testing in the market for 13 months, has undergone 4 independent audits, and most importantly, has been formally verified.

Traditional companies have perfected access controls and authorization for specific employees to handle financial transfers in various situations. For internet-native organizations to achieve meaningful scale, they also need similar controls.

Building on top of the Squads protocol, Squads has constructed a powerful, feature-rich platform that provides teams with a set of project management tools with team permissions. Developers can use Squads as their program upgrade permission, eliminating the risk of key person dependencies and reducing the risk of malicious code entering the system. It also gives them financial management controls, allowing for easy storage and allocation of grants, management of fundraising assets, income streams, liquidity mining rewards, and more.

What’s next?

Earlier this week, Squads made significant upgrades to the Squads platform and released several new products, making it even more powerful than before.

SquadsX

In addition to desktop and mobile interfaces, Squads now has its own web extension wallet called SquadsX. This is Solana’s first multi-signature browser extension wallet!

SquadsX is designed for teams and institutions, enabling teams to interact with decentralized applications and DeFi for the first time while still providing enterprise-grade security. SquadsX tackles one of the biggest issues with multi-signature wallets, which is the lack of availability in DeFi, and supports new group management activities such as liquidity provision, lending, and on-chain trading, all directly from Squads multi-signature.

Squads (v4)

In addition to SquadsX, Squads has also released a major upgrade to the protocol called “Squads v4”. Squads (v4) has been audited by Neodyme, OtterSec, and Trail of Bits, with formal verification by OtterSec and Certora currently underway. Squads anticipates that the Squads (v4) codebase, after being formally verified and rigorously audited, will be set as immutable by the end of November 2023. Squads (v4) introduces several new killer enterprise features, some of which we highlight below:

• Time Lock – Squads (v4) introduces a time delay between program upgrade approval and on-chain execution. Time Lock increases the opportunity to discover errors before new code goes into production.

• Roles and Permissions – Squads (v4) provides enhanced accounting and fee functionality across multiple addresses. Permissions include spending limits and threshold-free withdrawals.

• Fee Relayer – Squads (v4) also introduces a “Fee Relayer” that enables multi-signature wallets to pay for all Gas fees related to Squads. Once activated, team members can sign transactions with zero SOL balance, simplifying operations and allowing dapps to cover Gas fees.

• Mass Payments – Most native crypto startups have multiple employees and contractors, just like traditional organizations. Squads (v4) introduces the ability to execute batch payments, which is a very important feature.

• Support for Address Lookup Table (ALT) – Every Solana transaction requires listing each address involved in the transaction. Prior to ALT, this list had a practical limit of 32 addresses per transaction. In Squads (v4), after ALT, this number has been increased to 256 addresses per transaction, allowing users to make more complex transactions.

With SquadsX and Squads (v4), the Squads team has built the infrastructure for blockchain-native custody and is now building our exciting new products and offering compelling revenue streams on top of it.

Managing a business involves various aspects such as fund management, payroll, human resources, and engineering. In the crypto domain, operations also include granting permissions, transaction restrictions, on-chain voting, code authority, and delayed execution, among others. Ordinary people do not directly interact with protocols, and the fact is that in the crypto field, only a small number of people interact directly with the protocol. This means there is an absolute market need for simplifying business operations. We believe that Squads has opened the door for crypto adoption in a secure and reliable manner, offering some of the most attractive enterprise and institutional-grade products in the market.

Over the past 18 months, despite the bear market, the Squads team has shown unwavering focus and execution. We are delighted to support Squads and help lead the new era of internet-native infrastructure for self-custody and on-chain capital coordination.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!