Hardware Wallet

‘Father of the iPod’ helps Ledger create new cold crypto wallet

Tony Fadell, the man behind the iPod, iPhone and Nest Thermostat, collaborates with major crypto wallet firm Ledger to build a new cold wallet.

Hardware wallet provider Ledger, known for its cold-storage devices, announced its seventh crypto wallet in collaboration with the creator of the original iPod.

Tony Fadell, the inventor of the iconic iPod Classic model, has partnered with Ledger to help the company design its latest wallet device known as Ledger Stax. The company broke the news on Dec. 6 at Ledger’s bi-annual Web3 developer event, Ledger Op3n, in Paris.

Ledger’s upcoming new hardware wallet is a credit card-size device that features a large E Ink display, capacitive touch, Bluetooth support, wireless charging and more.

For the first time in Ledger’s product line, Stax contains a curved E Ink display which can be used to show the holder’s name or other wallet information, just like a book spine. The device is also equipped with magnets, allowing users to organize the storage of multiple similar devices and “stack” them in order, and that is why Ledger Stax was called so.

When designing the device, Fadell thought about what the modern stack of cash would look like. “He thought about it in two ways — the spine of the device is like the band around the stack of cash which shows you what’s inside, and you can stack them together using the magnets,” a Ledger spokesperson said in a statement to Cointelegraph.

*Ledger Stax hardware wallet. Source: Ledger*

Fadell, who also worked on the first three generations of the iPhone, designed Ledger Stax in cooperation with the industrial design firm Layer. “We need to be user-friendly… no! A ‘user-delightful’ tool, to bring digital asset security to the rest of us, not just the geeks,” the ‘Father of the iPod’ said.

According to the announcement, Ledger Stax will be available in Q1 2023, and customers can now pre-order the wallet on Ledger’s official website. In the future, it will be available from select retailers such as BestBuy in the United States.

The Ledger Stax wallet is priced at $279, a spokesperson for Ledger told Cointelegraph. The device is significantly more expensive than Ledger’s previous wallet, the Ledger Nano S Plus. Officially released in April 2022, Nano S Plus costs $79 at the time of writing. The previous iteration, Nano X, is priced at $149.

According to Ledger, the latest wallet product is designed to make interacting and signing transactions easier with a touch screen and a larger display. “Ledger Stax adds to our lineup, rather than replacing anything, allowing customers to choose the kind of experience they want,” the firm’s representative said.

FTX fiasco boosts Bitcoin ownership to new highs: Analysts weigh in

Data analytics firm Glassnode, hardware provider Trezor and Bitcoin exchange Relai observe an uptick in Bitcoin self-custody.

The bear market has inspired the little guy to accumulate vast amounts of Bitcoin (BTC). The number of wallets holding 1 BTC or more recently hit new highs, while those with 10 BTC or fewer are setting accumulation records.

However, to what extent are these newly minted “wholecoiners” taking custody of their private keys? Has the recent spate of insolvency among centralized exchanges (CEX) encouraged Bitcoin enthusiasts to move their Bitcoin into cold storage, removed from third-party risk?

For Checkmate, the lead analyst at Glassnode, the data would point to this result. “Overall it looks like at least a short-term movement towards self-custody.” Checkmate told Cointelegraph. “Partly out of concern for CEX solvency.”

“Last few weeks have been the largest monthly decline in exchange balances in history, peaking at 177.9K BTC/month in withdrawal volume.”

He also shared that withdrawals from exchanges have set new records, with users taking thousands of Bitcoin off exchanges. The spike is shown in red on the graph.

Customers withdrawing Bitcoin from exchanges has impacted exchange supply. The number of Bitcoin available on exchanges has “fallen to its lowest % of supply (11.99%) since December 2017. This means pretty much every coin that flowed in over the last 12 months has flowed out,” Checkmate observed.

Plus, according to Glassnode data, withdrawals from exchanges accounted “for ~30% of all transactions in recent weeks.” That would suggest an overall shift to self-custody: Bitcoin is being sent to hot or cold wallets.

When Bitcoin investors “withdraw” from exchanges, it can be to an offline hardware wallet, sometimes called cold storage, or an online wallet (hot). Hardware wallets or signing devices are tools that manage a user’s cryptocurrency wallet and private keys. Popular hardware wallets include Ledger, Trezor and ColdCard; hot wallets include Blue Wallet or Exodus Wallet.

Josef Tětek, Bitcoin analyst at Trezor — one of the world’s largest hardware wallet providers — has observed a considerable drive in sales in the past month. “We have seen a dramatic rise in interest in Trezor devices and new Trezor Suite downloads,” Tětek told Cointelegraph. “Our sales are hitting historic highs over the past few weeks.

“Normally, a bear market is rather a quiet period for us, so this uplift in sales only shows how big of an impact the collapses of FTX and BlockFi have on people’s trust in custodian services.”

Cointelegraph had previously reported that Trezor benefited from a 300% increase in hardware sales due to the FTX fiasco. That’s despite the price of Bitcoin grinding down to the mid-teens.

For Switzerland-based Bitcoin exchange Relai, it’s a similar story. The company shared with Cointelegraph that it’s seen plenty of new users as well as increased volume since FTX’s collapse, with November the best month in the Bitcoin exchange’s history.

Imo Bábics, the Chief Marketing Officer at Relai told Cointelegraph:

“Well, we are noncustodial, to begin with. We have definitely noticed more people buying Bitcoin due to the FTX crash.”

Relai added, “We know from our friends at ShiftCrypto that there’s been a huge increase in demand for their BitBoxes.”

ShiftCrypto is a hardware wallet provider like Trezor. The company’s social media feeds shared several stories of users who recently became Bitcoin self-custody advocates following FTX’s bankruptcy.

Binance makes moves in hardware wallet industry with new investment

Binance Labs has made a strategic investment in the Belgian hardware wallet firm Ngrave and will lead its upcoming Series A round.

Cryptocurrency exchange Binance is making a move in the hardware wallet industry. The firm announced on Nov. 21 that its venture capital arm, Binance Labs, made a strategic investment in Belgian hardware wallet firm Ngrave and will lead its upcoming Series A round.

Founded in 2018, Ngrave specializes in self-custody and provides a security suite comprising three major elements: connectionless hardware wallet Zero, key backup tool Graphene and the Liquid mobile app.

Yi He, co-founder of Binance and head of Binance Labs, pointed out that security remains one of the biggest challenges for crypto adoption. “Self-custodial wallets are one of the most secure methods for storing digital assets,” He said, adding that Binance is looking to continue backing startups that enhance user security.

“Binance Labs is excited to capitalize on the emerging hardware wallet sector and partner with Ngrave to bring sophisticated wallet products to both retail and institutional users,” Binance Labs investment director Tyler Z added.

Ngrave is not the first hardware wallet provider in Binance Labs’ portfolio. It previously invested in hardware wallet maker SafePal through its incubation program back in 2018. Binance has also been integrating SafePal’s solution into its platform, adding the SafePal Mini App into the Binance app in October.

In early November, Binance also partnered with hardware wallet maker Ledger to allow Binance users to purchase crypto directly through the Ledger app with their bank cards.

As previously reported, the ongoing crypto winter has accelerated the growth of the hardware wallet industry, while many centralized crypto exchanges have been scrambling to maintain operations. Unlike exchanges, hardware wallets allow users to better control their funds by securing their own private keys. According to data from several studies released in July, the crypto hardware wallet industry could grow at a faster pace than exchanges in the near future.

On Nov. 14, Binance CEO Changpeng Zhao even admitted that centralized exchanges may no longer be necessary as investors shift to self-custodial solutions. “If we can have a way to allow people to hold their own assets in their own custody securely and easily, that 99% of the general population can do it, centralized exchanges will not exist or probably don’t need to exist, which is great,” Zhao said.

The latest news comes shortly after Ledger CEO Pascal Gauthier argued that Binance-owned software wallet Trust Wallet must offer the Ledger Connect option in order to provide better security to its users. “Otherwise it’s just unsafe,” the CEO declared in a tweet on Nov. 13. The connection option essentially allows Trust Wallet users to store their keys on a Ledger device instead of storing them on a mobile phone or a computer.

@TrustWallet @cz_binance is time to offer a ledger connect option to your users. Otherwise it’s just unsafe. (1) https://t.co/AjjGrtBsQ2

— Pascal Gauthier @Ledger (@_pgauthier) November 13, 2022

A spokesperson for Trust Wallet told Cointelegraph that the platform is planning to release its integration with Ledger Connect soon, as the feature is a top priority item. The representative also stressed that Trust Wallet users have “full recoverability” for accessing their funds on a chain as long as they remember their secret phrase or private key.

Trust Wallet launches browser extension, integrates with Binance Pay and Coinbase Pay

The new browser extension lets users store, send and receive crypto across all EVM chains and Solana.

Following the collapse of FTX and the bank run on crypto exchanges in general, the self-custody Trust Wallet is gaining momentum. In one week, the company launched its long-anticipated browser extension and collaborated with Binance Pay and Coinbase Pay, whose users can now transfer their funds directly to a Trust Wallet account.

The browser extension was launched on Nov. 14 and is now available in Google Chrome and Opera. The extension lets users store, send and receive crypto across all Ethereum Virtual Machine (EVM) chains and Solana. A network auto-detect function provides users with a seamless DApp experience without the need to manually add networks.

The extension also includes multi-wallet support, NFT support, fiat on-ramp providers, and non-EVM blockchain integrations, as well as hardware wallet support.

On Nov. 16, the world’s biggest crypto exchange, Binance, reported the launch of Binance Pay’s Trust Wallet integration. Now, Binance users won’t have to scan or input a wallet address, having their Trust Wallet among the direct withdrawal options, and it won’t cost anything above the blockchain gas fees. At the time of publication, the function is supported solely on the Trust Wallet app’s Android version, but Binance said the iOS version would arrive “soon.”

The same integration will work with Coinbase Pay. According to Bipul Sinha, group product manager at Coinbase, an ability for users to easily fund their self-custody wallet or DApps corresponds with the company’s mission to “build a bridge to Web3.”

Earlier, Binance CEO Changpeng Zhao publicly endorsed Trust Wallet, stating that “self-custody is a fundamental human right.” The move comes as no surprise, given that Binance owns the U.S.-founded wallet provider since 2018.

As of Nov. 15, Trust Wallet Token (TWT) has surged by nearly 150% in six days, bucking the downturn in the cryptocurrency market, whose net capitalization has crashed by almost $100 billion in the same period. Meanwhile, the token’s trading volume has soared from 279 million TWT to 593.25 TWT in the same period, showcasing the market’s conviction in this uptrend.

Trezor reports 300% surge in sales revenue due to FTX contagion

The hardware wallet firm is certain that the latest uptick in demand is a result of investors rescuing their funds in the aftermath of the FTX failure.

Amid growing concerns over centralized cryptocurrency exchanges in the wake of the FTX crisis, investors are increasingly moving to hardware crypto wallets.

A major hardware wallet provider, Trezor, has recorded a major uptick in wallet sales in the aftermath of the FTX contagion, the firm’s brand ambassador Josef Tetek told Cointelegraph on Nov. 15.

Trezor saw its sales revenue surge 300% week-on-week and it’s still growing, Tetek reported, adding that the current sales are higher than a year ago when Bitcoin reached its all-time highs at $68,000. Trezor has also recorded a significant spike in its website traffic, which increased 350% over the same period, the exec noted.

According to Tetek, Trezor is quite certain that the uptick in new wallet users was a result of issues with FTX, a crypto exchange at the center of the latest industry scandal involving the misappropriation of user funds. The spike in demand for Trezor wallets started early last week, exactly when “rumors of the FTX insolvency started circulating,” Tetek reported.

Trezor expects further growth in new users in the near future as the failure of middlemen in crypto would only continue to unfold, Tetek suggested, stating:

“We expect this trend to continue in the short to mid term, as the contagion of FTX failure continues to unwind and Bitcoin or cryptocurrency holders lose trust in custodians and finally start to explore their options to self-custody their digital assets.”

According to the executive, Trezor is able to satisfy current levels of demand in the short to medium term. “Even if sales continue at this elevated rate, we are confident there would be a limited impact on our stock in the longer term, as we were already planning for an uptick in sales,” Tetek said. He also noted that Trezor doesn’t plan to increase the prices for its hardware wallets in line with its vision to make “self-custody accessible to all.”

Despite the spike in demand and the associated increase in support requests, Trezor isn’t planning to expand its hiring. “We did not have to downscale as we were prepared for a prolonged and deep bear market,” Tetek stated, adding that Trezor currently employs a total of 100 people working in multiple locations, with the majority based in Prague.

Cryptocurrency investors have been increasingly moving to self-custody with software and hardware wallets, with exchange outflows nearing all-time highs by mid-November 2022.

Ledger, a major rival hardware wallet supplier, has recorded a significant surge in demand for its devices recently as well. The French cold wallet firm saw one of its highest traffic days ever shortly after FTX stopped all crypto withdrawals last week, triggering inventors to offload their funds from exchanges to cold storage as soon as possible.

Amid the ongoing FTX contagion, even some of the biggest crypto exchanges started promoting the need for self-custody. Binance CEO Changpeng Zhao admitted on Nov. 14 that centralized exchanges may no longer be necessary as investors would shift to self-custodial solutions like hardware or software wallets.

“If we can have a way to allow people to hold their own assets in their own custody securely and easily, that 99% of the general population can do it, centralized exchanges will not exist or probably don’t need to exist, which is great,” the CEO said.

Ledger hardware wallets hit by the FTX earthquake — CTO

Some Ledger users weren’t able to process withdrawals using Ledger Live on Wednesday, according to social media reports.

Hardware-based cryptocurrency wallet provider Ledger has experienced some issues due to massive outflows from crypto exchanges amid the FTX bloodbath, according to its chief technology officer.

Ledger saw a “massive usage” of their platforms and suffered a “few scalability challenges” on Nov. 9, Ledger chief technology officer Charles Guillemet reported in a statement on Twitter.

Guillemet reasoned Ledger’s issues by the outcomes of the ongoing crisis of a major global cryptocurrency exchange, FTX. The chief technology officer said that crypto investors have been increasingly offloading their holdings from crypto exchanges to Ledger, stating:

“After the FTX earthquake, there’s a massive outflow from exchanges to Ledger security and self sovereignty solutions.”

According to Guillemet, Ledger should have resolved the outages as of 5:30 am UTC.

Ledger first reported the wallet issues on Nov. 9 at around 11:00 pm UTC, officially announcing that its hardware wallet interface application Ledger Live was experiencing downgraded server performance.

“Specific issues may vary, including connecting to the My Ledger tab and performing a Genuine Check,” Ledger said in a tweet, adding that the client’s assets were safe.

The hard wallet company subsequently took to Twitter to announce that it fixed the server outage about one hour after detecting the issue. “Our server outage has been resolved and all systems are operational,” Ledger said, adding that their server outage was resolved and all systems were operational.

Previously, Ledger Support also announced that it also temporarily paused FTX and FTX.US swaps on Ledger Live. Ledger launched the swap integration with FTX in July 2022.

According to Ledger’s Twitter thread, the outages caused some users to be unable to send any transactions using Ledger Live, including withdrawals.

The crypto community was quick to react to the issues despite many staying confident about Ledger’s operations amid the larger market issues. Some industry observers criticized Ledger for choosing the wrong wording to communicate with their customers amid the ongoing issues at FTX. People apparently got triggered by Ledger’s wording “assets are safe” as FTX founder Sam Bankman-Fried made a similar statement on Twitter on Nov. 7, only to delete it a day after.

“FTX is fine. Assets are fine,” Bankman-Fried declared in his tweet, just hours before the exchange stopped all crypto withdrawals after becoming unable to process such transactions.

The recent issues on Ledger Live came as Ledger saw one of its “highest traffic days ever,” Ledger’s chief technology officer told Cointelegraph. “Traffic has increased significantly over time, even without major industry events,” he noted, adding that Ledger also previously saw plenty of traffic spikes after Celsius bankruptcy, the Solana hack as well as the FTX bank run.

Guillemet also said that Ledger Live had an “unusual load on the device manager service,” which is likely to be attributed to users updating their device for the first time in a while or using a brand new device for the first time. “It was quickly resolved and the team is already working on improving automatic detection and restoration,” he added.

A major rival cold wallet provider, Trezor, has not recorded any issues due to the FTX issues so far, Trezor executive Josef Tětek told Cointelegraph. “The only way to avoid these massive blow-ups is to understand self-custody as a necessity,” the exec stated. “Not an option; a true necessity,” he emphasized.

Despite self-custody being associated with its own set of risks, many crypto people, including Tether and Bitfinex chief technology officer Paolo Ardoino, still recommend users “always to self custody in cold storage” if they want to hold their Bitcoin (BTC) and crypto.

Hardware wallets to take similar approach to potential Ethereum hard fork

Forked coins have proven to be lucrative in the past. Holders of Ethereum came to possess an equivalent amount of Ethereum Classic when it forked in 2016.

Ethereum’s blockchain Merge is expected to take place around 5:05 am UTC on Sept. 15. It is a milestone that marks a full transition toward proof-of-stake for Ethereum and eliminates the need for energy-intensive mining by a projected 99.9% when compared to Proof of Work (PoW).

Some miners are also getting ready for a hard fork that would allow them to continue using PoW consensus. Forked coins have proven to be lucrative in the past. The holders of Ether (ETH), for example, came to possess an equivalent amount of Ethereum Classic (ETC) when it forked in 2016.

In the event of a new hard fork, in which the Ethereum blockchain would split into two different networks, users holding ETH on-chain would have an equal balance of ETHPoW (ETHW) on the forked chain. This would be an additional token and a totally different asset from ETH.

For ETH holders using hard wallets, the question is more straightforward: What would happen to your tokens if a fork followed the Merge? We have prepared some answers to this question so you don’t get lost or trapped in a scam in the coming hours.

Most of the hard wallet providers are taking the same approach: Monitor adoption on the new chain as well as the forked chain before adding any support for ETHPoW. They also say that there is no need for users to take any action during the upgrade.

Charles Guillemet, chief technology officer of secure hard wallet provider Ledger, explained to Cointelegraph: “In the event of a fork, the first thing everyone should know is that any assets the user currently has on the main network are safe,” adding that the company “will not support an ETH Proof of Work fork on day 1, as there are a number of technical aspects that need to be evaluated to ensure it’s safe for users, chief among those is ensuring the new chain is secure.”

Similarly, Josef Tětek, Bitcoin analyst at Trezor, said: “Trezor Suite will not support interaction with the pre-merge proof-of-work coins after the Merge, but users can still use their Trezor with a third-party interface like MetaMask to access the older version of the blockchain.”

Tangem, a Swiss wallet provider, also has no plans to support the PoW fork. “Until we are certain of the seriousness of the proponents of this hard fork, we are not ready to show our customers support for the project,” stated chief technology officer Andrey Lazutkin.

ETH holders who use non-custodial wallets and control their own private keys will have fast access to both sets of coins (ETHW and ETH). Private key owners can collect the forked coins using MetaMask to connect the PoW network to an Ethereum Virtual Machine wallet.

Crypto wallet companies also warn users to take extra precautions during and after the network upgrade. “Scammers are especially active during major network upgrades. Do not engage with anyone who claims you need to take urgent steps to protect your coins,” warned Tětek.

Bitcoin might be down but interest in crypto and NFTs is here to stay: Ledger CEO

According to Pascal Gauthier, CEO at Ledger, in spite of the bear market there is a lot to be optimistic about in the crypto and Web 3 space.

The future for crypto remains very bright. That’s according to the CEO of Ledger, Pascal Gauthier who sat down for a tête-à-tête with Cointelegraph in his home country, France. Gauthier, who enters his eighth year working at Ledger, explained that the recent downward price action in Bitcoin has not brought interest in crypto to a standstill:

“Bitcoin might be down, but people are buying NFTs and you know, they’re participating in communities.”

Gauthier voiced his opinion while sitting in front of the doors to the Biarritz Grand Casino, home to France’s largest Bitcoin conference, Surfin Bitcoin. The conference was a Bitcoin maxi-style affair where royalty and Bitcoin hobbyists rubbed shoulders to nurture Bitcoin adoption in France.

Commenting on the “religious war of Bitcoin maxis versus the rest of the world,” Gauthier explained that it’s a question of product fit. While competition is good as it drives innovation, it’s also a question of use case: “It’s also interesting to see that people just use the product. And when they use the product, they use Bitcoin and sometimes they use other things.”

In response to the crypto contagion , in which Hodlonaut, Zipmex, Vauld, and countless other exchanges experienced difficulty managing—or went as far as freezing–customers’ funds, Gauthier told Cointelegraph that Ledger’s sales are “Way up.” Gauthier lamented that the increase in sales is bittersweet as people have to learn “The hard way.” During the interview, he gave a stark warning about the importance of holding one’s keys.

On a lighter note, however, Gauthier is optimistic and hopeful for the future of crypto. From the Metaverse to crypto gaming to more participation in Web3 technology, Gauthier admitted that it’s early days for the space but a lot of things in the future make him go “Wow!”

Hardware wallet Trezor enables direct crypto purchases with MoonPay

The new integration with MoonPay and SatoshiLabs-founded Invity platform provides buy, sell and exchange features directly in the Trezor wallet.

Hardware walletcompany Trezor is moving to enable direct crypto purchases with a new partnership with the crypto fintech startup MoonPay.

Trezor, Czech Republic-based hardware wallet provider, has partnered with MoonPay to allow its customers to buy crypto directly in their hardware wallet, according to an announcement on Wednesday.

Backed by major industry investors including Tiger Global and Coatue, MoonPay is a crypto payment service that allows users to buy and sell cryptocurrencies and nonfungible tokens (NFTs) using debit cards, credit cards and other payment methods. In April 2022, the firm raised $87 million from investors like Justin Bieber and Snoop Dogg to focus on NFTs and Web3.

The collaboration with MoonPay builds on Trezor’s previous partnership with Invity, a crypto exchange comparison tool integrated directly into the wallet.

Like Trezor, Invity is a startup operating under the parent firm, SatoshiLabs. The platform connects clients with trusted partner exchanges to provide direct-to-custody trades with various payment methods. Combined, the three platforms provide buy, sell and exchange features directly in the Trezor wallet.

The new integration allows customers to buy and sell a wide number of cryptocurrencies through a noncustodial crypto wallet, helping users to better protect their funds. At the time of writing, Trezor supports more than 1,000 cryptocurrencies, including Bitcoin (BTC), Ether (ETH), Tether (USDT), BNB, Cardano (ADA) and others.

The latest news is yet another milestone for crypto purchases on Trezor, as the hardware wallet has been previously supporting crypto buys on its native app Trezor Suite via an in-app Trade feature. The option has been available through the crypto exchange comparison tool created by Invity since at least late 2020, Trezor said in one of its blog posts.

“By allowing Trezor owners to buy crypto directly from their wallet, we’re tapping into a committed cohort of cryptocurrency users who take security very seriously,” MoonPay senior business development manager Antonio Talledo said. “Through this partnership with MoonPay, we’re taking the lead to bring secure, borderless and easy financial freedom to billions”

FDIC–FTX spat is another reason for investors to self-custody their funds

Between the collapse of Celsius and the FDIC’s warning to FTX, consumers should be awakening to the benefits of moving their funds off of centralized exchanges.

Searching for more evidence that self-custody of your cryptocurrency holdings beats a centralized manager? Look to the latest action by the Federal Deposit Insurance Corporation (FDIC).

The agency sent a letter to FTX Exchange this month — along with four other entities — that included a cease-and-desist order for “false and misleading statements.” Namely, it accused the exchange of falsely implying that user funds were FDIC-insured.

It could have turned into an ugly situation if customers expected — but did not receive — a certain level of protection in the event of catastrophic failure. It’s difficult to ascertain how heavily the guarantee factored into the adoption of FTX services, but the firm enjoyed a record-breaking year in 2021 with revenue growth of more than 1000%.

Ultimately, the incident serves as an endorsement of self-custody, because it reminds us that exchanges can only protect user funds as far as their pockets allow them. Empowering consumers to hold their own funds on ideally cold wallets significantly reduces the chance their funds will be lost to a company’s insolvency, like in the case of Celsius, or even to a hacker gaining access to wallets held by a central entity.

Self-custody isn’t perfect, but it can be better than the alternative

Those who say self-custody is fraught with danger would be right. Retail investors cannot be expected on a widespread scale to properly manage and protect their funds in a wallet owned solely by them, and many, in fact prefer the oversight from a seemingly too-big-to-fail central exchange.

Even experienced crypto investors and holders can send tokens to the wrong address by mistake or even in some cases, face issues with technical glitches on self-custody wallets. If mainstream adoption is the goal, this isn’t even close to being a safe way to exchange value.

It’s a catch-22 situation. Money isn’t inherently safe when it’s held by scarcely regulated central entities known for suffering hacks and always being vulnerable to the possibility of executives running away with user funds.

Cryptocurrencies, at their very core, are about independence and moving away from the financial establishment that has influenced monetary policy for a very long time. So, the industry is crying out for a solid self-custody solution that resolves the associated dangers.

Last month @Brett_FTX tweeted that you can deposit your paycheck into FTX, and that they were FDIC insured.

I called BS and said they are either lying or holding clients money externally at other banks.

Brett said I was wrong.

FDIC just answered it… and Brett deleted tweets. https://t.co/QuiXQ8rDiA pic.twitter.com/xkgxP5r4Ez

— Stephen Geiger (@Stephen_Geiger) August 19, 2022

There are crypto enthusiasts who do not wish to hold their funds exclusively on a central exchange. For them, the whole point is to move away from traditional finance (TradFi) and overt centralization.

This is a valid choice and should be respected. It should also be understood that mainstream adoption will likely only be plausible thanks to centralized entities able to provide security and guarantees on the funds held by their platforms.

The independence/security tradeoff

We have seen European Union regulators attempt to tie in self-custody with verifiable identities. This misses the point to some degree. Blockchain technologies are designed to bring elements of decentralization to the financial world and allow unfettered access to people around the globe.

Making it easy and user-friendly to set up a wallet within a wider network of self-custody wallets clearly brings the potential for a worldwide revolution in how we treat money. Those living in developing nations, and more specifically the more than one billion unbanked, can retain complete control over their funds without being at the mercy of a (CeFi) centralized financial institution.

Good, safe self-custody is the key to unlocking such possibilities with the result of significant real-world impact.

This entirely depends on the needs decided by users. It feels safer for many to trust their crypto funds with the custody of a centralized exchange (CEX). While independence can be worth the precautions of risk diversification — through hardware wallets, open-source software and multisignature setups — the majority of regular people are probably vastly safer on Binance, FTX and other CEXs.

Centralized finance (CeFi) may be slowly turning into de facto TradFi. This is not necessarily a bad thing. If centralized exchanges can be insured like their traditional counterparts, then this massively reduces the risk of transacting with them.

Meanwhile, engaging with decentralized exchanges and smart contracts can also be a risky endeavor. Decentralized finance (DeFi) supporters hope it will become less so in time as the industry matures. Increased focus on user experience and safety should swiftly follow this maturation.

A great upside to DeFi is that adopters do not have to trust vague messaging from entities such as FTX. They’re free from the risk of most centralized failures that could result in the loss of their funds.

The power to decide rests with the consumers and whether they trust regulators to protect them while they utilize a CeFi entity — which emulates TradFi — or decide to wait for a better, sorely needed self-custody solution.

Ultimately, there will be a demand for both DeFi and CeFi amid the rich tapestry of blockchain and crypto offerings. Rather than being forced to choose between two suboptimal offerings, investors will have a panoply of options to consider.

Tom Tirman is the CEO of IQ Protocol, an NFT renting solution that allows games and other platforms to wrap digital assets and lend them out to users looking to play and earn. Before crypto, Tim graduated from a top technological university in Eastern Europe with a law degree and continued his studies at the Stockholm School of Economics. In his free time, he also spearheads PARSIQ, a web3 data aggregator.

The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.