Hybrid Custody: A New Paradigm in Custody

Web3 is about empowering us through, self-sovereignty of data, identity, choice, control, and access to transparent information, and new economic models

Users should feel safe, informed and in control at all times, ready and able to make the right choice.

Third party custody introduces an issue of trust, and counterparty risk.On the other hand, ownership introduces an issue of responsibility and a single point of failure — yourself

The drawbacks of each shows why these two extremes are increasingly unsuitable for most users’ circumstances.

We have recently witnessed major market operators fail, having employed centralised custodial models — users have been locked out of their assets, and forced to seek legal recourse to find a resolution, if one even exists. Even exchanges have been known to temporarily freeze assets, and in some cases lose them all to attacks.

The convenience of not having to worry about being responsible for keys is balanced against the real risks and loss of control that result from delegating trust. “Not your keys, not your assets”

With self-custody, at the other end of the custody spectrum the trade-off is that to gain self-sovereignty, autonomy and control, users have the very real risk of asset loss through their own mistakes or errors, because the self-custodian is fully responsible, and a single point of failure, with no-one to turn to for help if things go wrong.

According to Forbes, over $200bn of crypto has been lost forever because of mistakes, accidents or user error.

It seems we are between a rock and a hard place. Is there a better way?

Recent advances in technology mean that there is now a third way, which we call Hybrid Custody, where the owner can be assisted in a number of core functions and services including key management and recovery. They do this with their circle of trusted guardians, whilst retaining all of the benefits of autonomy and control.

In understanding Hybrid Custody, key elements such as security credentials, are no longer the sole responsibility of a self-custody owner.

Hybrid Custody is the best of both worlds — owners don’t have to bear the burden of worrying about key management, and can get many of the benefits of a simpler, custodial wallet without the risks and loss of control.

Guardian is pioneering Hybrid Custody as a new option with clear benefits that we believe will drive Web 3.0 adoption at a much larger scale.

The ultimate protection of cold with the instant availability of hot, to better foster active users by keeping them safe in all circumstances.

In this way, Hybrid Custody is a call to arms to build better dapps, wallets and platforms to ensure absolute security and peace of mind without the risk of full centralisation, or the pitfalls of self-custody.

The next step in Hybrid Custody is Conditional Custody. This uses pre-agreed policies and workflows to allow providers, venues and platforms to ‘share’ custody with owners who retain full control, but only under a mutually pre agreed set of circumstances, that ensures every participants rights over digital assets are transparently, consistently, and fairly enforced according to the rules and conditions that everyone agreed to through multi-party consensus on any device.

Decentralised and open to developers, what will you build?

Build into any wallet or dapp; governed and run by the community, for the community.

My recent wallet 2.0 paper outlines thoughts on wallet limitations, the future of wallets, this is our thesis on the next generation of wallet codename: SuperWallet.