When the first cryptocurrency ‘Bitcoin’ was created, its genesis block included text from a headline of that day: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” Amidst a global financial crash, crypto offered a decentralized alternative to a financial system that was broken.
But despite Bitcoin’s promise, many cracks have surfaced in the crypto industry namely – hacks, rug pulls, malpractice, and wrongdoing.
So with all the evidence before us, why are we continuing to place our trust and wealth in areas that have failed so many in the past? Is there a solution that guarantees the complete safety of assets?
The answer is a self-custodial wallet, representing true autonomy and offering an egalitarian approach to managing users’ crypto. With complete ownership, users can exchange crypto, stake, buy, sell, and even leverage assets for loans without the interference or approval of third-party intermediaries. Simply put, a self-custodial wallet allows you to manage and hold the keys to your financial vault, empowering users to become their own custodians.
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Why You Shouldn’t Store Your Crypto in Exchanges
It’s no secret that the industry is rife with cautionary tales spelling out the dangers of third-party exchanges. In just the past couple of years, we’ve seen the infamous collapse of FTX and the subsequent sentencing of Sam Bankman-Fried for stealing $8 billion from customers as well as Binance’s recent $4.3 billion fine for money laundering.
On top of these bad actors, we also see countless hacks occur within the industry, with losses exceeding a colossal $1.8 billion in 2023 alone and in 2024 so far, the global crypto community has lost at least $200 million.
Many of us in the industry have been directly impacted by hacks or know someone who has. So, how many more devastating incidents before we learn our lesson? We have the statistics, so why would you risk storing your crypto on an exchange?
How Self Custody Promotes Financial Inclusivity
Not only do self custodial wallets enhance users’ autonomy around the security of their assets, but they also promote and facilitate financial inclusivity. Traditional credit systems are known to sideline those with lower incomes or limited credit histories but with crypto and the freedom of a self custodial wallet, financial accessibility is determined solely by asset ownership. The beauty of it is that whether you’re a first-time investor with minimal capital or a seasoned financial enthusiast, the merit-based nature of crypto ensures the playing field is level and most importantly accessible to all.
So you might be asking, where do self-custodial wallets come in?
On top of the aforementioned security and inclusivity, the answer is financial sovereignty. Unlike traditional finance or even exchanges, a self-custodial wallet allows for independence and full control over assets. This completely removes the need to rely on third-party intermediaries with users becoming the sole owner of all their assets, private keys, and data.
This is particularly imperative for destabilised markets across the world. Look at Argentina and Ecuador, two real-world examples where traditional finance has fallen short. These countries are subject to unstable governments and economies. In 2023, the Argentinian Peso lost nearly 78 per cent of its value while Ecuador faced a country-level liquidity shortage.
As a result, residents turned to crypto as a hedge against hyperinflation and a means to bolster national wealth. For them, alternative finance is not a desire but a necessity. In an environment where a volatile currency is the norm, self-custodial wallets can offer a level of security and assurance that traditional banking systems cannot provide.
Economic Opportunities for the Underbanked
Self-custodial wallets also open up the world of DeFi lending. If you’ve ever tried to take out a loan at your local bank, you most likely navigated tedious applications that felt complex, limiting and full of barriers. DeFi changes the game by cutting out the middlemen. It enables users to deposit digital assets as collateral and borrow against them through smart contracts, simplifying the process. Self-custodial wallets are making this accessible by offering resources and integration options at users’ fingertips. With more than half of the underbanked population (52%) agreeing that crypto can offer economic opportunities for them in a way that traditional finance cannot, DeFi lending is the tangible proof of a practical solution. People deserve financial accessibility, flexibility and transparency.
Looking forward, self-custodial wallets are poised to shake up how we manage and store our finances. By empowering individuals to manage their own assets securely and independently, they offer a gateway to financial participation and innovation that isn’t possible with traditional finance.
It’s clear we need to look beyond centralized parties for asset custody. A shift towards self-custodial asset management brings transparency, security and control to the forefront. Importantly it empowers financial sovereignty, underscoring the benefit of being your own custodian.
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