How to prevent the next FTX , Celsius , Voyager, Genesis ? The common solution — Decentralized MPC Wallet w / Social Login
Cryptocurrency has been a hot topic for many years now, and despite its growing popularity, it has not been without its share of controversies. One of the biggest issues the crypto community faces is the mismanagement of funds by centralized crypto organizations. These organizations hold large amounts of cryptocurrency on behalf of users, which they seem to be ok to manage or deploy just like banks. The caveat though is that there is no governmental insurance or protection of user funds. Although these incidents have nothing to do with blockchain or decentralized technology, it is giving the industry a bad name.
The reason for all the recent bankruptcies in Crypto can be boiled down to a single line —
Mismanagement of User Funds.
In this article, we’ll explore how decentralized MPC wallets with social login can solve the problem of misuse of funds by centralized crypto organizations and how this can prevent future debacles like the recent FTX incident.
Centralization
A centralized crypto organization is a single entity that holds and manages the crypto assets of its users. This type of organization has complete control over the assets and is responsible for their safekeeping. However, this centralization has proven to be a major vulnerability for users, creating a single point of failure. If the organization is hacked or mismanages the funds, users risk losing their assets.
Solution
One solution to this problem is to move to a decentralized model, where users control their own assets. Decentralized MPC wallets, also known as multi-party computation wallets, are a type of wallet that enables users to store and manage their crypto assets securely. Instead of relying on a single entity to hold and manage the assets, these wallets allow users to control their assets through a network of independent parties. This means that users have complete control over their assets and are not reliant on a single entity to keep their assets safe.
Benefits
In addition to the security benefits of decentralization, MPC wallets also offer an additional layer of security through social login mechanisms. This involves the use of multiple trusted sources to authenticate the user’s identity, such as social media accounts, email addresses, and phone numbers. This makes it more difficult for hackers and other malicious actors to gain access to the user’s assets, as they would need to bypass multiple layers of security while it makes it easy for users to access and recover their wallets
The combination of decentralization and social login provides a much more secure and easy way of managing crypto assets, compared to traditional centralized models. By removing the centralized point of control, users are protected against the risk of losing their assets in the event of a hack or mismanagement by the centralized organization. And by using multiple trusted sources to authenticate the user’s identity, the risk of unauthorized access is significantly reduced.
The recent FTX incident is a perfect example of the risks associated with centralized crypto organizations. While the exact details of the incident are still being investigated, it is clear that the centralization of the exchange was a major vulnerability. However, if the users of the exchange had been using decentralized MPC wallets with social login, the outcome of the incident would have been very different.
Learnings and the way forward
New Startups to build the next wave of cryptocurrency are learning from this. For example , Tokenizer SuperWallet which I am building offers all Digital Wallets in Decentralized MPC wallets with Social Logins only. This means the platform has no incentive or means of misusing customer funds. In addition Tokenizer also includes a FDIC regulated bank account and Visa Debit Cards for using crypto in day to day activities for personal and business use with full security and convenience.
In conclusion, decentralized MPC wallets with social login can provide a more secure and reliable way of managing crypto assets, compared to centralized crypto organizations. By removing the centralized point of control and adding an additional layer of security through social login mechanisms, users are protected against the risk of losing their assets due to hacks or mismanagement. This not only helps to prevent future debacles like the FTX incident, but it also helps to build confidence and trust in the crypto community, which is crucial for the long-term growth and success of the crypto industry.
