Self-Custody; The Future of Crypto
Originally, the crypto industry was built on seamless peer-to-peer trading and self-custody. Satoshi envisioned a world where individuals could process and transmit payments from anywhere across the world without any form of intermediary. This system would run on nodes and would be secured by an encrypted system known as cryptography.
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However, as the industry progressed, we witnessed a proliferation of centralized exchanges. These platforms helped to drive crypto adoption in various parts of the world due to certain features such as an easy-to-use customer interface, constant liquidity, etc.
The Cost of Centralization
Centralized crypto exchanges offered consumers a convenient and attractive way to invest in crypto. However, the use of these platforms has cost the industry consumer protection and is responsible for the massive crashes that have affected many industry players in recent times, causing them to lose billions of dollars. Regulation and KYC requirements by these exchanges also conflict with cryptocurrency’s decentralized nature.
The implosion of exchanges like FTX and AAX have caused users to begin to question the supposed decentralization of the crypto industry.
A properly implemented and maintained decentralized finance economy (DeFi) will serve the interests of both customers and operators, not to mention provide codified consumer protections that regulators are trying to achieve.
However, it is important to note that while the underlying blockchain technology that many cryptocurrencies are built on may be decentralized, the cryptocurrency industry itself is not free from centralization.
For example, certain exchanges or mining pools may have a disproportionate amount of influence on the market or the network. Additionally, the development of some cryptocurrencies may be more centralized, with a small group of individuals or organizations having significant control over the direction of the project.
Players in the industry are beginning to consider self-custody as the way forward and the future of cryptocurrency.
See also: Is Web3 Currently Overhyped? An Introductory Guide.
What Is Self-Custody?
Self-custody refers to the practice of holding and managing one’s cryptocurrency assets rather than entrusting them to a third party, such as a cryptocurrency exchange or online wallet service.
There are several reasons why self-custody is seen as a solution to many of the problems currently facing the cryptocurrency industry:
- Security: One of the main concerns with holding cryptocurrency is the risk of theft or loss. By holding and managing your own assets, you have complete control over your own security measures and can take steps to protect your assets from hackers or other threats.
- Control: When you hold your own assets, you have complete control over your own funds. You can make transactions and decisions without needing to seek the approval of a third party.
- Decentralization: One of the main goals of cryptocurrency is to create a decentralized system that is not controlled by any single entity. By holding your assets, the decentralization of the system is upheld.
- Privacy: Most people prefer self-custody because it allows them to keep their financial transactions and holdings private. When you use a third-party service, you may have to provide personal information and your transactions may be visible to others.
- Cost: Self-custody can often be cheaper than a third-party service, as you are not paying fees to have your assets held and managed for you.
Overall, self-custody is a key component of the cryptocurrency ecosystem and can help to address many of the challenges facing the industry.
It’s worth noting that self-custody also comes with some responsibilities and risks. For example, you’ll need to securely store your assets, which may require a hardware wallet or other security measures. You’ll also need to be proactive about keeping your assets safe and secure, as you won’t have the protection of a third party if something goes wrong.
Conclusion
We are once again at a tipping point where the crypto industry must challenge centralization. We must challenge the corrupt CEOs, business secrecy, and go back to the roots of cryptocurrency and empower people to wrest control of what is rightfully theirs.
Blockchain spells freedom from inflation, tyranny, and centralization, and we must seek to achieve that by embracing systems that promote self-custody and person-to-person trade.
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