What is Crypto Self Custody?

Created by Ethos Support, Modified on Tue, 7 Feb, 2023 at 10:12 PM by Ethos Support

Link to Ethos Cryptopedia

What is Crypto Self Custody?

In the overall history of human finance, currencies and other liquid loose assets have always had the benefits of ease-of-transfer, ease-of-use and ease-of-transport. These benefits though have come with respective problems that remained unsolved for centuries. Fiat currencies and metal minted coins are also easy to steal, easy to lose and generally are fairly flammable or easy to melt. Since these issues are all rather innate by nature, there have been institutions and firms that have worked to remedy these issues since the beginning of the history of currencies. Most of these institutions have come to be known as “banks;” financial intermediaries who will secure, monitor and manage your assets for a cut of the profits. Whether you have seen banks in movies, photographs or in your locality, banks feature huge metal safes, armed guards and clerks behind desks all for the purpose of acting as the custodians of your wealth. In exchange for keeping safe custody of your wealth, banks will take a cut of the wealth as a custodian’s fee and will pay or take interest from your accounts based on whether you are depositing or taking loans from the bank. As long as financial assets have kept a physical form, whether it be on paper or metal bars, we have always needed the help of physical custodians. 

Recent advancements in information technology have disrupted this field in numerous ways. Online payment services and banking accounts have abstracted currencies to just numbers in online books. While this sounds simple and naive, this is not that far off from the idea of paper and metal currency. If slips of paper and coins can represent assets that are worth more than their physical worth, can numbers on secure internet networks do the same justice? Skeptics of internet finance have also posed problems that are not too original and are similar to issues with previous forms of currency. Problems of theft, cyber-attacks and internet corruption have deterred internet users from depositing assets online. Banks who work online have to have the latest state of the art internet security in order to keep custody and trust with their clients. 

There is an issue though with all of these systems. Whether your assets are in a bank vault or on a bank website, your assets can be found in a central location. Placing your assets in one place has always made it easier for potential perpetrators to find your assets, so it would make sense to split your assets and hide them in different locations, right? Decentralizing wealth has always been a solution for the books, such as when rich Italian Merchants would hide their gold all over the Papal States or when European Monarchs would split their estates for inheritance to multiple children. The issue with decentralization is that it has always been hard to track and maintain multiple stores of wealth. Whether it has been holding multiple keys or multiple bank account passwords, decentralization has not been a realistic way to manage assets. That is, until now.

Blockchain Finance & Financial Self-custody

Recent advancements in information technology have given us the blockchain. Blockchain technology brings one of the most secure ways, if not the most secure way, to create decentralized financial applications. The decentralized nature of a blockchain ecosystem ensures users that they will be able to deposit and access assets in a decentralized network using fundamental principles of cryptography. By being able to secure assets in a network owned and watched by no single entity, users are able to achieve safe financial self-custody of their assets. That means no more cuts, no more interest and no more financial intermediaries for investment placement and security. At the same time, self-custody on decentralized blockchain networks brings about a new era of universal accessibility to secure financial custody. For centuries, the storage and security of liquid assets has always been a privilege to those who have local access and the funds to pay for bank and other financial intermediary services. Now, all that users need to secure their assets is a legal identity and an internet connection.

These technological advancements have not come without downsides. To invest in a cryptocurrency or blockchain asset, a user needs to sign up for a digital wallet, and these wallets are usually specific to each different type of cryptocurrency, meaning you need a different digital wallet for each cryptocurrency you own. The primary current issue with blockchain finance is that there are so many cryptocurrency wallets and assets to use and invest in across a variety of blockchain networks. Even if a user can maintain multiple accounts, how would that user keep track of all of their security information? That is where the Ethos Vault app and Magic Keys comes in. At Ethos, we have worked hard to create a Universal Vault before which users can learn about, store, send and receive assets from. Typically, setting up a cryptocurrency wallet requires the creation of a public address to receive assets and a private key to access the assets. Our Ethos Vault will allow users to access a variety of assets in a variety of respective wallets using one single key protected by multiple new layers of security involved in our new Ethos Vault and magic keys system. 

Our aim in developing and releasing the Ethos Universal Vault is to bring additional layers of safety, security and convenience to the realm of financial self-custody. The primary concerns with furthering financial self-custody have always been questions of security, ease-of-use and accessibility, and we aim to address all of these concerns through implementing this comprehensive solution. Through our use of the Ethos Universal Wallet, we have created a means for everyone to regain full control of their financial assets through self-custody, made possible by the security brought to all through the blockchain. We do however encourage all of our prospective users to educate themselves and to use all of the informational tools at your disposal to make educated investing decisions. With such great power comes great responsibility, and through our published content and Universal Ethos Vault we will continue to encourage concurrent self-custody with responsible self-education.

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