Having one’s digital assets on non-custodial wallets is the way forward to storing them securely, says Liminal’s founder Mahin Gupta,
As the world of digital assets rapidly advances, the need for self-custody is quickly gaining traction as a preferred mode of storing and managing digital assets. Self-custody defined as the facility to store and manage ones own digital assets by self-securing their private keys gives users greater control over their assets. With exclusive access to the private keys associated with the wallet one has the ability to maintain privacy and are not required to provide any personal information to a third-party custodian.
Citi Bank estimates as many as 88% of financial institutions will continue exploring the digital asset and blockchain applications space in 2023. In fact, global leaders in management consulting have championed combining the power of decentralised finance (DeFi) with appropriate safeguards to unlock value for issuers, investors, and financial firms.
The concept of self-custody is gaining ground as an increasing number of digital asset holders look for ways to securely store and manage their assets without having to rely on a third-party service provider or custodian. This is especially important for those without the technical expertise or resources to manage their wallets or for someone looking for a more secure option than those provided by custodial services.
Due Diligence Before Selecting Custodian Service
It is essential to conduct due diligence before selecting an exchange and custodian service provider. Crypto remains unregulated in many countries, meaning users’ funds do not have the same protection as other investments. An exchange or custodian service must be licensed and regulated by a regulator to provide virtual asset services.
To create trust in the crypto industry, some major exchanges publicly release proof of reserves. This evidence proves the exchange has enough backing to cover all user funds, thus safeguarding the investors. Self-custody is the most secure way to store digital assets, but using licensed custodian services is more convenient.
Self-custody vs keeping one’s assets on exchange
When storing digital assets on a centralized exchange or with a custodian provider, it acts like a shared custody where the exchange holds the keys to one’s assets. While it is a simpler and more convenient option – the exchange takes care of security and custodianship for users – one can transfer or withdraw their assets to any wallet address. However, it does come with the risk that in case of an unlikely incident of the exchange being under cyber attack, or faces any financial losses or files for bankruptcy one may lose their assets.
Keeping one’s digital assets stored in personal custody in the confines of their wallet is the most secure way to store digital assets. The key lies in the fact that as long as one doesn’t share their private keys with anyone else, their assets are under their control and completely secure. Additionally, the blockchain offers a greatly secure repository for one’s digital possessions, which is not easy for hackers to penetrate.
Overall, self-custody is quickly gaining traction as the preferred method of storing and managing digital assets. It offers greater control, privacy, and cost savings. As the world of digital assets continues to evolve, self-custody is sure to become an increasingly popular option.
Mahin Gupta is the Founder of Liminal, a self custody wallet management solution for digital assets. In 2012, he launched India’s first bitcoin company, buysellbitco.in. He also co-founded one of the country’s largest crypto exchanges, ZebPay. Mahin has over 10 years of experience in managing wallet infrastructure and has managed billions of dollars in transaction volumes and digital assets. His background in computer science contributes to ZebPay’s highly-secure platform which helps various family offices and organizations protect their digital assets through multi-sig wallets.
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