No More FTXs! Consensus 2023 Attendees Discuss Future of Crypto Custody
After the implosion of FTX, the conversation about trusting centralized bodies with crypto keys returned to the limelight. Several million customers are still waiting to reclaim somewhere between $1 billion and $10 billion worth of crypto assets tied up in the Bahamas-based exchange, according to the initial bankruptcy filings.
The collapse reminded people that self-custodying your own digital assets, by keeping the cryptographic keys (on their own computers, or a hardware device disconnected from the internet, or even written on a piece of paper locked in a safe), would spare consumers from being burned by schemes like FTX.
This article is excerpted from CoinDesk’s inaugural Consensus @ Consensus Report, the product of intimate, curated group discussions that took place at Consensus 2023.
Crypto purists have long argued that self-custody is the only way to go and that having control over one’s own keys avoids the perils of centralization. But crypto users have often observed that custodying one’s keys is nerve-wracking, as there are few recovery mechanisms in place if users lose their keys.
A closed-door roundtable conversation at Consensus 2023 looked at how policymakers can create effective guidelines for consumer protection without undermining, and perhaps advancing, the crypto ethos of controlling your own assets. Participants hailed from a variety of backgrounds, from technology to regulation to business.
The challenge is acute. Consider the responses to a poll question posed to the broader Consensus audience: What percent of users have skills/comfort to store crypto keys?
Of the 169 attendees who answered the electronic survey, slightly more than half (54%) answered that less than 10% of crypto users were competent and comfortable storing their own keys.
With that reality as the backdrop, the private discussion at Consensus, conducted among four groups seated at roundtables, tackled the following questions including whether centralized institutions will always play a massive role as custodians for the industry…
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