With the advent of blockchain technology, we are able to do something we’ve never been able to do before: create digital assets that are traceable, exchangeable, and secured by code. This allows us the ability to securely keep custody of these assets ourselves and transfer to anyone else in the network without a central intermediary. This has led us to design products around crypto assets on the premise that we will all keep and maintain ownership of these assets as this asset class matures. In other words, we are expected to bring our own bank.
However, although the technology enables self custody of these crypto assets today, there are some glaring inefficiencies that exist in this type of safekeeping. Not all of us want to be our own bank.
The Sad State of Crypto Custody Today
Firstly, the nature of the passwords/keys to manage these crypto assets are technical strings of 20+ alphanumeric characters, allowing for basically 0 margin of error from human negligence. As we all know, these errors are irreversible on the blockchain. This is a technical barrier that needs to be overcome before mass market adoption. Other than the complexity of managing the keys of crypto assets, the paper/hardware wallet being used is also vulnerable to negligence, theft, and is burden to carry around just to access your investments.
Secondly, the current best practice for securing your crypto assets is by using hardware wallets via a USB device. The USB is connected only to sign transactions and disconnected otherwise to minimize vulnerability. While this method reduces the vulnerability of a cyberattack on your crypto assets, it also eliminates the ability for anyone to prove ownership of these assets while the USB is disconnected.
All assets have value producing attributes (fiat, property, etc), which can be leveraged to earn interest/dividend when it is claimable and liquid. This is especially true with crypto assets as they have a 24-hour market of liquidity. There is a huge amount of value being lost in crypto assets today due to inability to claim ownership through self-custody.
The Future of Custody
We believe the future of crypto asset custody involves compliant custodians that provide a user-friendly interface for everyone to securely access their crypto assets while minimizing vulnerabilities of human negligence. By entrusting Arcana as a custodian, all asset ownership is now provable by the custodian and can leveraged toward a variety of value-producing opportunities hosted on our custodial platform at the user’s discretion. The products hosted on Arcana’s custodial platforms are the crypto equivalent of fixed income products to which we have access today through our conventional bank’s savings account.
At Arcana, we strive for utmost compliance in order to protect all our stakeholders in our ecosystem. We will be transparent about our product and operations towards our community. By working together and diligently, we will remove the friction and stigma to push crypto to the mainstream.