Securing cryptocurrency investments is increasingly steering towards self-custody. This trend has become more pronounced in the wake of multiple failed cryptocurrency exchanges and millions in cryptos lost to hacks.
The shift towards self-custody represents a significant move towards greater financial autonomy and security in the industry.
Not Your Keys, Not Your Cryptos
Self-custody refers to the practice of individuals securely managing their cryptocurrencies as opposed to relying on third-party services. In a landscape where even the most seemingly secure platforms can be compromised, holding assets in personal wallets where one controls the private keys can significantly mitigate the risk of loss.
In 2023, the cryptocurrency industry was rife with security breaches, collectively amounting to losses in the hundreds of millions. These incidents have spanned a wide range of platforms, from decentralized finance (DeFi) protocols to wallets and bridges, exposing various vulnerabilities in the crypto industry.
One of the most notable events involved Atomic Wallet, which suffered a $100 million breach impacting more than 5,500 users. This incident was particularly significant due to its ties to the North Korean cybercrime syndicate Lazarus Group.
Other platforms like CoinEX and Stake.com faced similar attacks, losing millions in tokens, highlighting the urgent need for rigorous security assessments.
“In the past 104 days, Lazarus has already been identified as responsible for stealing almost $240 million in cryptoassets. Elliptic analysis confirms that some of the funds stolen from CoinEx were sent to an address which was used by the Lazarus Group to launder funds stolen from Stake.com, albeit on a different blockchain,” analysts at Elliptic Research confirmed.
The scale of the recent attacks has varied, affecting large and small players in the industry. For instance, the Mixin Network reported a staggering $200 million loss in a hack that targeted the platform’s cloud service provider’s database.
Meanwhile, Trust Wallet’s $4 million loss was due to a sophisticated social engineering attack that redirected funds to a wallet requiring only a single signature, utilizing forged KYC (Know Your Customer) documents.
Read more: 9 Crypto Wallet Security Tips To Safeguard Your Assets
This variety of attacks demonstrates the multiple ways in which crypto platforms can be vulnerable. Therefore, highlighting the crucial importance of self-custody in the cryptocurrency industry.
“Self-custody gives [investors] direct control over their crypto assets, and includes managing their private keys. By directly interacting with blockchain networks, investors can reduce the risk of third-party interference and unauthorized access. This allows [investors] to create their own security processes and use cold storage solutions for increased security,” MetaMask explained.
Understanding the Shift to Crypto Self-Custody
Indeed, crypto self-custody is emerging as a necessary step toward ensuring financial sovereignty. This concept, rooted in the core philosophy of Bitcoin, is about eliminating reliance on third parties for managing cryptocurrencies.
Anibal Garrido, General Director at BTC Techno, emphasized this point, noting that self-custody is not just an ideological stance but a practical necessity to safeguard digital assets.
“Self-custody is not a philosophy or even an obligation for a user, it is simply a necessity that guarantees and protects your digital assets from those who only want to benefit themselves instead of you,” Garrido told BeInCrypto.
Recent developments have significantly bolstered the case for self-custody. For instance, Jack Dorsey’s Block recently launched the Bitkey wallet. It is a self-custody solution designed to offer an easier and more secure way for people worldwide to manage their Bitcoin.
Additionally, Uphold’s new self-custody wallet, Vault, is another step towards enhanced security in digital asset management. These innovations are part of a larger trend that is even evident through on-chain data.
Read more: Ledger vs. Trezor: Which Hardware Wallet Is Best in 2024?
Blockchain analytics firm Santiment recently spotted a behavioral shift among Ethereum whales. These big players are increasingly moving their funds away from crypto exchanges to self-custodial wallets, highlighting a broader preference for this asset management model.
“The largest Ethereum wallets continue forming an encouraging pattern, with exchange wallets now reduced to 6-month lows and non-exchange wallets soaring to an all-time high. More and more coins continue moving to self custody,” Santiment said.
The Crucial Role of Education
Adopting self-custody is not without its challenges, primarily around the understanding and responsibility it entails. Garrido highlighted that self-custody is the “correct and proper” way to avoid losing cryptos. However, with great power comes great responsibility.
“It is your only responsibility to protect your private keys. But you must be aware that there’s no 1-800-BITCOIN phone line that you can call in case you mismanage your private keys,” Garrido added.
An individual’s grasp of self-custody in cryptocurrency and its myriad details is essential. Without this understanding, they might find themselves engaged in an unwinnable struggle initially. Indeed, it is their knowledge that empowers them, offering both security and peace in the crypto market.
Read more: Best Multi Cryptocurrency Wallet To Use in 2023
Garrido pointed out that education is key to understanding and adopting self-custody. For Spanish speakers, he recommended resources such as “Estudio Bitcoin” and “Dinero Sin Reglas.” Meanwhile, Andreas Antonopoulos’ YouTube channel and Jameson Lopp’s Casa Blog are his top choices for English speakers.
These platforms, just like BeInCrypto Learn, provide valuable insights into the secure management of digital assets. Still, robust security requires effort and education.
“To think that self-custody is a walk in the park is a serious mistake. Consider this: How secure is your house against burglars? Will a lock be enough? Windows without iron bars will make you feel safe? And these two simple examples are easy to implement? The answer is no. As users, our security doesn’t have to rely on third parties, it has to come from ourselves, but if this means more preparation and more education,” Garrido concluded.
Looking ahead, Garrido believes more user-friendly interfaces and a deeper understanding of sound money could be the key to mass adoption. But he highlighted that one cannot expect regulators to step in and drive this trend as “regulations are designed to control, not to protect.” Until society is not ruled by power parties, education must come first.
Disclaimer
Following the Trust Project guidelines, this feature article presents opinions and perspectives from industry experts or individuals. BeInCrypto is dedicated to transparent reporting, but the views expressed in this article do not necessarily reflect those of BeInCrypto or its staff. Readers should verify information independently and consult with a professional before making decisions based on this content.
Be the first to comment