Cryptocurrency self-custody is gaining popularity as a response to the failures of multiple cryptocurrency exchanges and significant losses resulting from hacks. Self-custody allows individuals to manage their cryptocurrencies securely, mitigating the risks associated with third-party services. The trend is marked by the growing adoption of self-custody solutions, including notable platforms like Block’s Bitkey and Uphold’s Vault.
The security of cryptocurrency investments is increasingly geared towards self-custody. This trend has been accentuated after the failure of multiple cryptocurrency exchanges and the loss of millions of cryptocurrencies due to hacks.
The shift toward self-custody represents significant progress toward greater financial autonomy and security in the sector.
“Not Your Keys, Not Your Cryptos”: The Self-Custody Debate
Self-custody refers to the practice of people securely managing their cryptocurrencies rather than relying on third-party services. In a landscape where even the most seemingly secure platforms can be compromised, holding assets in personal wallets where private keys are controlled can significantly mitigate the risk of loss.
In 2023, the cryptocurrency sector was plagued by security breaches, which together resulted in losses of hundreds of millions. These incidents have spanned a wide range of platforms, from decentralized finance (DeFi) protocols to wallets and bridges, exposing various vulnerabilities in the cryptocurrency industry.
One of the most notable events was Atomic Wallet, which suffered a $100 million breach that affected more than 5,500 users. This incident was especially significant due to its ties to the North Korean cybercrime syndicate Lazarus Group.
Other platforms such as CoinEX and Stake.com faced similar attacks, losing millions in tokens, highlighting the urgent need for rigorous security assessments. Elliptic Research explained the following:
“In the last 104 days, Lazarus has already been identified as responsible for the theft of almost $240 million in crypto assets. Elliptic analysis confirms that some of the stolen CoinEx funds were sent to an address that was used by the Lazarus Group to launder funds stolen from Stake.com, albeit on a different blockchain.”
The scale of recent attacks has varied, affecting industry players large and small. For example, Mixin Network reported a staggering $200 million loss in a hack that targeted the database of the platform’s cloud service provider.
Meanwhile, Trust Wallet’s $4 million loss was due to a sophisticated social engineering attack that redirected funds to a wallet that only required a signature, using falsified know-your-customer documents.
This variety of hacks demonstrates the multiple ways in which cryptocurrency platforms can be vulnerable. Therefore, highlighting the crucial importance of self-custody in the cryptocurrency industry.
The Crucial Role of Education in Cryptocurrency Self-Custody
Adopting self-custody is not without challenges, primarily around the understanding and responsibility that comes with it. Garrido stressed that self-custody is the “correct and appropriate” way to avoid the loss of cryptocurrencies. However, with great power comes great responsibility.
It is essential for a person to understand cryptocurrency self-custody and its countless details. Without this understanding, they may initially find themselves embroiled in an unwinnable struggle. In fact, it is their knowledge that empowers them, offering them both security and peace in the cryptocurrency market.
Looking ahead, Garrido believes that easier-to-use interfaces and a deeper understanding of safe money could be the key to mass adoption. But he stressed that regulators cannot be expected to intervene and drive this trend, since “regulations are designed to control, not to protect.” Until society is governed by powerful parties, education must come first.
By Leonardo Perez
