Self custody matters.

By CrSanity | Irregular Format | 14 Feb 2023

Cryptocurrencies came long way since the introduction of Bitcoin in 2009.

Many people assigns different capabilities to them, but the most appealing is value. If something has value, you want to keep it safe from people who might want to take it from you. That's why you should consider having full control over your assets i.e. having self custody over them.

Principles of Bitcoin are transparency and safety, utilizing cryptography Bitcoin and other cryptocurrencies are supposed to like a bank vault, but on your electronic device. There are many types of wallets, including Cold and Hot wallets. Cold wallets are designed specifically to utilize every security aspect that cryptocurrencies offer, including storing your digital assets offline which connects both digital and physical safety.

But cold wallets are not without a flaw. That is why in order to increase connectivity and avoid rejecting too much of safety, Hot wallets were designed and introduced. Hot wallets are a give-and-take between safety and usefulness in everyday life, they offer aforementioned connectivity at a price of some safety.

But there is a third type of wallets I wanted to point out. Those are Not Self Custody Wallets. A example of such wallet is your Binance spot account, or name any other exchange spot wallet you use. There is a saying in the space which describes it perfectly.

At a price of almost all the safety that is designed in cryptocurrencies we get... well nothing extraordinary, at least today. The main reason why one would use a exchange should be trading. But trading can be done on Decentralized Exchanges, there are many on different chains and they offer probably more safety than Cex'es. The trading aspect of exchanges is not the main concern we should think about, the biggest problem is the incentives that exchanges give you in order to lure you into leaving your coins on them. In other words, staking and lending.

Everyone wants to gain a interest on their holdings, You know it, I know it, exchanges also know it. But there are now many different protocols like Aave that offer the same solutions, without depriving you of the innate safety of self custody.

We all remember Mt.Gox.

It is no longer wild west that was in 2014, but if something bad happens on exchange you are left with your country legislation and that sometimes will not help you much. Such things happen even on the biggest and most advanced ones like Binance.

For a list of 10 biggest exchanges hack you can go here.

It is true that self custody is often more demanding than just storing your crypto on a exchange, but often it does pay off.

No one requires you to instantly order a Ledger or a Trezor, it is not that necessary, but a wallet like Metamask or any other hot wallet installed on a relatively safe device is always worth the work.

None of information in this article should be considered a financial advice, it's my own analysis and facts I wanted to share with this wonderful community.