Today: U.S. bank regulator grands financial institutions the authority to custody crypto. And custody providers Hex Trust and BitGo announce they have added support for Tezos.

Today: U.S. bank regulator grands financial institutions the authority to custody crypto. And custody providers Hex Trust and BitGo announce they have added support for Tezos.

By Allen Walters | Publish0x posts | 24 Jul 2020


For holders of PoS chains and for Tezos in general this is very exiting news. Tezos has positioned itself as a very interesting asset that has a lot of interesting and unique features, but in this case two features especially.

1. Tezos core protocol prevents confusing hard forks.
Hard forks can be a risks for DeFI, NFT's, STO's, but also custodians. This is especially evident in the following passage:

Use of custody agreements. The letter notes that custody agreements are an important risk management tool and should clearly establish the custodian’s duties and responsibilities. Additionally, the handling, treatment, and servicing of cryptocurrencies held in custody may raise unique issues that should be addressed in the agreement, such as the treatment of “forks” or splits in the code underlying the cryptocurrency being held. - Source

One of the risks that come with blockchain, is the risk of hard-forks. A hard fork, splits the main chain and in some cases may cause confusion on which chain is the main chain. This is particularly important when high, real-world asset value is stored on-chain. If a chain splits into two chains, then tokens are copied with each split and start to live on both chains. After which the question must be answered which token represents the real-world value? It is impossible for both copies to hold value, since Security Tokens are backed 1 on 1 by real world assets. This must be decided quick, decisive and final, before any of the tokens get traded.
Forks cause all kinds of confusions for whatever is live on the original chain. In custody agreements this issue with possibly big consequences needs to be addressed.

For custodians that want to support Tezos, this is a non-issue. There will be no forks that lead to a split chain for Tezos. This is one of the unique and revolutionary features that makes Tezos a game-changer. All the attention and focus for Tezos from cryptoland was aimed he immense success of Tezos ICO and the success of LPoS staking features for a while, but qualities like on-chain governance and the absence of malicious forks is way more interesting and an absolute game-changer. For an extensive explanation on this feature, read this article: Hard forks can be a risks for DeFI, NFT's and STO's. Here's how Tezos avoids this issue. 

2. Tezos' PoS and staking rewards that can be earned are an extra revenue potential.
In Tezos' Liquid Proof of Stake, it is very easy to set up a node and provide delegation options. This way, custodians can provide their customers the option to delegate their XTZ and earn extra revenue through staking rewards. All in full compliance with regulations.
This will be possible for banks:
Crypto custody services may extend beyond passively holding "keys." This would mean that banks can offer staking services for their customers. This is an inevitable process and will happen and it will be a positive development for decentralization. We already have exchanges staking $XTZ. Adding more entities to the list of possible nodes, like banks and other financial institutions, will mean that a lot more nodes will be set up. The goal is to be decentralized, not to exclude institutions.

New custodians for Tezos:
Both BitGo and Hex Trust have fully integrated the Tezos blockchain and staking/ baking functionalities. As Hex Trust puts it, it will be "Enabling us to provide full bank-grade custody for any Security Tokens projects built on the protocol."

BitGo about Tezos: “Tezos is one of the most promising projects in the blockchain space with its focus on governance, quick confirmation times, staking and security,” said Pete Najarian, Chief Revenue Officer, BitGo. “Our teams found that Tezos integrated easily into BitGo’s platform as security, trust and verification are core to our mission of building trust in digital assets”

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Allen Walters
Allen Walters

Fascinated by blockchain and future proofing cryptocurrency. Discover the tech before it gets relevant.


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