Blockchain-Based Digital Asset Custody
Blockchain Digital Asset Custody
Blockchain-based digital asset custody is a burgeoning industry. This new discipline was not even present less than half a decade ago, but today, many firms are using it to store and manage clients’ assets. These firms provide a comprehensive suite of services, including secure storage, buy and sell capabilities, and cryptographic keys. These keys are a critical component of digital asset custody, as they enable the secure exchange of digital assets.
While many of the initial players in this market are Fintechs or crypto-asset specialists, there is a growing number of traditional players, including banks, that are preparing to enter the space. For instance, Fidelity, a leading asset manager, announced that it will offer digital asset custody services beginning in March 2019. Many challenges remain, including security of transaction addresses and private keys. Additionally, custody providers must ensure that third parties can access the relevant information without compromising security.
Digital asset custody is critical for the development and acceptance of digital assets. As more investors begin to invest in cryptocurrencies, the industry needs professional custodians. They can offer confidence in the security of the assets, which enables easy trading. The growing popularity of digital assets has led to the development of several types of digital asset custody services.
Whether you need a traditional custodian or a specialized custodian depends on your needs and level of technology expertise. The benefits of a custodial service include insurance against loss or theft, and the ability to earn interest on crypto deposits. Some custodians even offer lending and staking options.
Blockchain-Based Digital Asset Custody
Digital custody providers must continually evolve to stay ahead of technological advancements and regulatory requirements. The success of a digital asset custody service depends on its ability to provide a complete suite of digital asset trading and storage services. A comprehensive offering will encourage more people to invest in digital assets. In addition, a full range of services will allow for a more efficient management of financial assets.
Digital asset custody is a new market that requires new skills and responsibilities. The early players are building the infrastructure and preparing for the future. As this industry evolves, a common approach to custody will emerge. It will require close collaboration among key participants. Until then, however, the future remains uncertain.
Digital asset custody requires a high level of security. Online custodians must use multiple approval processes and limit access to private keys. However, this security model is expensive and inconvenient compared to cold storage. Moreover, digital assets must be stored off-chain in a secure location for maximum security.
Cryptocurrency users must be aware of the costs involved in digital asset custody. Some providers are available only to institutional investors or require a high balance. For instance, Coinbase Trust requires a minimum balance of $500,000 in digital assets. In addition, third-party custody providers charge a range of fees for safekeeping funds. Withdrawals can also be subject to fees.