The Limited Times

Now you can see non-English news...

Self-custody wallets: Crypto investors trust their own offline wallet


The collapse of FTX has rocked the crypto scene. Confidence in centralized exchanges is waning: many crypto investors are now storing their currencies in so-called self-custody wallets. You become your own banker.

Enlarge image

Self-custody wallets: Crypto self-custody is becoming increasingly popular

Photo: Silas Stein / IMAGO

Investor money worth more than a billion US dollars has disappeared: The bankruptcy of the Bitcoin exchange FTX calls the future viability of the entire crypto industry into question.

According to the data provider Glassnode, crypto investors sold more Bitcoin in November than ever before: The global Bitcoin balance fell by 729,000 Bitcoin within a week due to the net outflows.

This compares to only three periods in the past: the April 2020, November 2020, and June-July 2022 sell-offs.

Crypto investors have lost confidence in many ways.

First, the confidence that Bitcoin and Co will recover quickly has suffered greatly.

Second, following the FTX disaster, many investors no longer trust the major crypto exchanges: they no longer trust their crypto assets to be kept safe on a centralized online network.

Online custodians like FTX are not only popular targets for hacker attacks.

They can also be suspected of stealing and diverting crypto assets from their clients, as in the FTX case.

Users were no longer able to get their money - although they were firmly convinced that their deposits on the online crypto exchange were safe and protected from access.

But in the FTX case, the bank turned out to be a bank robber.

No wonder that so-called self-custody wallets are now gaining in importance.

They allow crypto investors to self-custody their currencies.

The new project by iPod founder

Tony Fadell

(53) came at just the right time: a hardware wallet for offline storage of cryptocurrencies.

With the help of the self-custody wallet, investors become their own bankers, so to speak.

At the same time, you are personally responsible for the security of your stored cryptocurrencies, because only you have the private key to do so.

Tony Fadell:

The father of the iPod now offers an offline cryptocurrency wallet

Photo: Marc Müller/ dpa

Fadell has partnered with French tech company Ledger to create a new cryptocurrency wallet.

The device is credit card sized, with a curved back and display.

Previous models released by Ledger like Nano S came in the form of USB memory sticks.

More than five million units of the Ledger Nano series have been sold and, according to the company, not a single one has been hacked.

The success of the USB sticks made the company a unicorn in 2021 after a funding round of $380 million.

The new wallet "Ledger Stax" will cost 279 US dollars when it goes on sale in March 2023.

Like almost every smartphone these days, the device can be charged wirelessly.

More than 500 different coins and tokens are to be supported.

The crypto wallet display has a special purpose – it can display NFTs.

"The secure hardware up to this point was like all MP3 players before the iPod, and it was time for an iPod," said

Ian Rogers

(62), Chief Experience Officer at Ledger recently.

Fadell spent almost a decade at Apple under

Steve Jobs

(56), where he oversaw the design of the portable music player.

But the crypto wallets are no longer about music files, but primarily about encryption and complex algorithms.

Cryptocurrency trading requires the use of complex cryptographic keys used to authorize transactions.

These keys are usually stored online, for example at an online exchange.

But after the FTX collapse, the trend is turning: According to crypto expert

Gilbert Fridgen

, interest in self-custody of cryptoassets is increasing.

"Not your keys, not your coins" is a popular saying in the scene.

Self-custody requires a lot of technical understanding

If you no longer trust the big platforms such as FTX, Coinbase or Binance, it is better to put your cryptocurrencies in your own wallet, the so-called self-custody wallet.

In order to stay in control of personal investment assets, many experts advise crypto investors to keep the assets in such self-custody wallets.

But even self-preservation has its pitfalls.

Since the services were not originally designed for the average crypto user, some level of understanding of how crypto works is required.

First, users need to create their own wallet and manually transfer their funds from all other wallets to the new wallet, which is a more complicated process than opening a new bank account.

Most importantly, wallet users should also understand the importance of their private keys.

"An incorrect entry or an incorrectly noted key can, in extreme cases, lead to the complete loss of the assets - without a provider being able to restore them," warns Fridgen.

The cases in which users lost millions of dollars because they forgot to access their crypto wallet were in the press worldwide.

According to Fridgen, caution is particularly important when it comes to online self-custody services: "Online self-custody services are no better than FTX because users cannot assess what happens to the keys."

The source code with the solutions remains hidden.

According to experts, self-custody hardware wallets such as the new offline cryptocurrency wallet Ledger Stax are probably the currently most viable option with the highest level of security.

With the iPod, Tony Fadell showed that you can drastically simplify the cumbersome use of other MP3 players.

However, it remains to be seen whether this is also achievable for self-custody.

However, the manufacturer Ledger has been criticized because the software used is not open source, i.e. the source code is not open and can be checked by third parties.

The biggest competitor Trezor advertises exactly with this property.

Another competitor is SafePal.

There are also some smaller providers with special features such as integrated fingerprint scanners.

The crypto market does not yet have an optimal solution.

According to the experts, investors want an even simpler method of keeping their assets safe and inexpensive.

"Bitcoin, Ether and Co. could again be subject to a maturing process in 2023," says market analyst Timo Emden.

The FTX collapse will not be the last crisis the crypto industry will face.

Source: spiegel

All news articles on 2022-12-15

You may like

Trends 24h

News/Politics 2023-03-25T09:59:34.255Z


© Communities 2019 - Privacy

The information on this site is from external sources that are not under our control.
The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.