The turmoil witnessed in the cryptos market following the FTX Group collapse portrays the existence of secure and scalable custody solutions for digital assets as fundamental to the industry’s wellbeing and continued expansion.
Self-custody offers a pathway to realize the objective decentralization fundamental in the crypto ecosystem. It aligns with the popular saying “not your keys, not your crypto,” warning crypto users from trusting wallet providers in holding assets and initiating transfers.
Custodial wallets – similar to electronic payments and conventional banks- are centralized entities in holding assets and initiating transfers. Similarly, crypto exchanges replicate the stock exchanges in facilitating trading and recording transaction trails. Often, the centralized entities leverage the easy-to-use interfaces in offering multiple products and services within a one-stop shop.
Crypto Industry Heavyweights Opinion
The FTX Group fiasco, alongside Crypto.com’s $400 million mishap, casts doubts on the transparency and security of centralized entities now perceived as powerful actors abusing the accumulated power. While attending the November 10-11 Pacific Bitcoin conference, MicroStrategy co-founder Michael Saylor attributed FTX collapse to pursuing multiple good ideas by powerful crypto actors in an unethical and irresponsible fashion.
Saylor, known for Bitcoin evangelism, illustrates that a viable future of the crypto industry will rely upon regulating digital assets, custodial wallets and exchanges. In contrast, the Binance chief executive, Changpeng Zhao, while addressing the Bali B20 summit on Monday, dismissed the possibility of the regulations protecting crypto users from bad players.
He emphasized that they are good liars and pretend to possess advanced knowledge. Consequently, the law will hardly prevent the bad players from violating the regulations. Instead, regulations will only reduce the violation instances.
Crypto Self-custody Merits
The turmoil caused by FTX Group’s downfall encourages the crypto community to embrace self-custody wallets for storing their cryptos. Self-custody allows the crypto holder to exercise the freedom to store cryptos as a fundamental human right. Its pursuit affirms Saylor’s suggestion that self-custody confers property rights to investors while preventing powerful actors, including custodial wallets and exchanges, from corrupting crypto participants and networks.
The pursuit of self-custody is invaluable in delivering checks and balances on custodial wallets and exchanges. Besides, it sustains continuous competition in exercising transparency and virtue during transactions. Saylor’s argument indicates that self-custody is critical to guaranteeing security, integrity and decentralization.
FTX chaos Push Crypto towards Self-custody Solutions
The alleged potential of criminal misconduct causing FTX fall has incentivized crypto participants to embrace self-custody solutions. Glassnode acknowledged that last week’s events prompted 17-month high withdrawals from the centralized wallets and exchanges. Simultaneously, self-custody wallets experienced soaring net inflows. Smart Contract Wallet Safe experienced the self-custody flight as its net inflows exceeded $800 million following the FTXX saga.
The Binance-acquired Trust Wallet (TWT) is up by 103% in 7 days to exchange hands at $2.28 as per Coinmarketcap data. TWT illustrates that self-custody is critical in extreme market conditions as it empowers participating holders to determine wallet operations and technical updates.
In support, Blockchain Association policy head – Jake Chervinsky indicated that self-custody awareness is a mandatory priority for newcomers. The survival beyond the FTX Group chaos indicates that self-custody will guarantee the crypto-community self-sovereignty and decentralization desired in the crypto ecosystem.