The failure of FTX caused a significant number of customers to move their cryptocurrency holdings from exchanges to private wallets. However, there is still the possibility of errors being made by humans.
This pattern wasn’t started by FTX on its own, either. The failure of cryptocurrency organizations such as Celsius Network, Three Arrows Capital, Terra, and others in 2022, in addition to the banking crisis that occurred in March 2023, was a crucial factor that led users to self-custody their assets.
A person whose funds are still stuck in FTX is quoted as saying, “F**k Sam,” in reference to Sam Bankman-Fried, the company’s founder and former CEO, who is currently under investigation for criminal activity.
An unnamed source shared their thoughts with Wired, saying, “But I should have managed my risk too.”
He is now responsible for his own coin storage and only places them on exchanges for a short period of time when trading.
Another person who is in the same situation as you has indicated that he has his cryptocurrency stored either in a peer-to-peer contract that earns interest or in a personal wallet.
Within the crypto community, the phrase “Not your keys, not your money” evolved into a credo that should be followed at all times. Many financial experts believe that your money does not belong to you if it is kept by a centralized institution. Self-custody, often known as putting it in a cold wallet, is required in order for you to legally claim ownership of the item.
On the other hand, Hugh Brooks, the director of security operations at the blockchain security company CertiK, claims that.
“There is a significant user-experience problem in the field of crypto—and a lot of that has to do with self-custody and key management.”
As a result of the collapse of the FTX in November of last year, many users have resorted to self-custody, according to Brooks. This is true.
According to Pascal Gauthier, CEO and Chairman of Ledger, the company had its most successful month ever in November. November was the month that, you guessed it, was the most successful month in the company’s history.
In spite of the downward trend in the market and the pressure from regulatory authorities, Ledger was able to sell one million devices between June 2022 and February 2023. According to Wired, during the course of the prior eight years, it had a cumulative sales volume of 5 million.
But, as Brooks pointed out,
“Self-custody poses a significantly higher threat to the typical drug user.”
He cautioned that people frequently forget their wallet recovery words or lose them and that they also frequently put them in unsafe locations.
Ledger is working on the introduction of a service called “Ledger Recover,” which will divide a recovery phrase into three encrypted shards and send them to three different custodians: Ledger, the custody firm Coincover, and the code escrow company EscrowTech.
“A significant number of individuals claim that they are unable to use cryptography because they are unable to remember the recovery phrase. “The problem lies within the industry,” Gauthier stated. Eliminating that source of discomfort will encourage a great number of more people to join the place.
Trezor, another major manufacturer, has a solution called Shamir Backup. This tool enables users to divide a recovery phrase into 16 shards that may then be sent to reliable individuals or stored in secure locations.
However, Josef Ttek, a Bitcoin analyst at Trezor, expressed his opinion that even though he hopes that more people will use this solution, individuals must first accept responsibility for their own actions.
“If you want to claim financial sovereignty, you need to be in charge,” the expert advised. This is something that is always being harped on to the user, as Ttek put it.
According to Simon Morris, the chief strategy officer of ConsenSys, the wallet’s parent business, there are also software wallets, specifically MetaMask, that are working on technical solutions for handling recovery phrases. One example of one of these solutions is a new technical standard for Ethereum.
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