During the initial cryptocurrency years, the security of digital assets was a large issue. The coins were kept by most individuals in their personal wallets or in exchanges. But, when cryptocurrencies started gaining value and popularity, particularly among large investors and institutions, secure and reliable storage became of great concern. This led to the emergence of what today is known as crypto custody solutions services that are meant to secure digital assets of their holders, and, more crucially, the holders of such assets who are often institutions managing large amounts of cash.
Initially, it was extremely easy to use crypto custody. Coins were held either as private key or hardware wallets. But this method was risky. In case the private key was lost, the money was lost forever. I recall that I read about individuals who lost millions of dollars due to forgetting their passwords. That hurts an individual, but to large institutions who take money on behalf of customers, the losses may ruin trust. This is the reason why professional crypto custody services were needed.
As time went by, the industry began to come up with institutional grade custody solutions. They are high-security designed systems, insured, and financially regulated. Good examples of these companies are Coinbase Custody, Fidelity Digital Assets, and Binance Custody. Crypto assets are stored in their offline wallets, that is, the wallets are not connected to the internet, and therefore they are not prone to hackers. Multi-signature systems are also employed in many of these companies, implying that no transaction can be approved by only one individual. This is very helpful in minimizing theft or abuse.
The other force of change was the implication of governments and regulators paying attention. In such states as the United States and the United Kingdom, institutions are not allowed to possess digital assets on behalf of customers, except when they comply with some rules. Therefore, crypto custody providers began collaborating with the regulators to guarantee the transparency and adhering to the law. This served to draw in more conventional investors such as hedge funds, pension funds and banks into the crypto world.
Nowadays, crypto custody is more advanced. Most of the custodians are currently able to provide additional services like staking or lending or even trading on the same platform. Being a Nigerian, I am finding that institutions are gradually embracing these systems even in Africa. Between regulated custodians and self-sovereign ones, Nigerian companies investing in blockchain projects are starting to put their trust.
To sum up, crypto custody solutions have developed not only in the form of a wallet storage but also complex and regulated systems designed to serve institutions. This development indicates that cryptocurrency is not a preserve of people or tech enthusiasts anymore. It is already becoming a grave financial aspect of the world and it is the safe custody that will make it institutional and dependable.