Today, crypto is a multi-billion dollar market. The ecosystem has survived many of the harshest times in its history. Like any technological innovation, there are many native problems. This ‘lucrative’ market faces a myriad of shortcomings, including criticisms from regulators and long-standing financial institutions. However, the biggest hurdles currently facing the market are due to their underlying infrastructure.
Changpeng Zhao from Binance, the CEO of Binance said crypto custody was one of his biggest challenges. CZ said that crypto wallets’ inaccessibility and complexity is a major obstacle to mass adoption of digital assets. This was another issue he highlighted, and if given the chance to do so, he would choose this.
“If I had no financial pressure, I would want to solve the most difficult problem that is blocking adoption. That would be the problem I would try to solve.”
Crypto Custody: The Loophole
Everyone who is familiar with cryptocurrency knows that there are a few things you should know about how to store your newly discovered wealth. Stakeholders have in the past lost huge sums of money as result of wallet breaches or forgetting one’s seed phrase. Loss of private keys means that only 20% of BTC’s supply can be accessed.
Are these efficient enough to support an ecosystem that is being called the future in finance? While Rome wasn’t built in a day, the issue of crypto wallets needs to be addressed sooner than later. Non-custodial wallets may be a better long-term solution, according to some crypto enthusiasts. However, the complexities involved in securing one’s seed phrase paint a different picture.
“But today, most people cannot store their private keys securely. They must be technically proficient to use the wallets. You cannot allow your computer to become infected. If your computer gets a virus, there’s all kinds of problems that will happen. You will lose your money.” added CZ Binance.
Worse, most wallets that are not custodial do not offer a way to pass on heritage to the future. It is quite unfair to invest in an industry where there is no guarantee that one’s offspring will benefit in the event of their death. It is common in traditional finance.
Custodial wallets provided by cryptocurrency exchanges don’t fare any better. While they may have a history structure, the users do not control their keys. There are good chances that anyone who holds funds at a affected exchange is going to suffer substantial losses in the event of an attack such as the Mt Gox hack.
What is the best solution for a safe crypto storage system? The perfect answer would be it’s neither white nor black, but the emergence of Non-fungible tokens (NFTs) seems to be paving way for tamper-proof and heritage-designed Web 3.0 wallets.
Future of Crypto Wallet Infrastructures: NFTs
NFTs are a hot topic in crypto, and digital artists like Beeple have made a fortune from their efforts. The indistinguishable and unique nature of NFTs, a fairly new field of innovation could prove to be an important step in developing non-custodial crypto-wallets.
Serenity shield, an emerging DApp, uses NFT technology for a strongbox solution to address seed recovery issues and heritage concerns. The Web 3.0 project, which was launched in 2021 features an encrypted storage solution that allows digital assets to be stored. Serenity Shield allows crypto-natives to open an account and store their seed recovery phrase securely.
Serenity’s strongbox then partitions the sensitive information into three unique NFT keys. The account owner gets the first NFT, while the potential heir receives the second. Finally the Serenity Shield smart-contract stores the last key. The strongbox information can only be accessed by two NFT keys. These NFT keys allow users to access sensitive data or to transfer ownership rights to others.
According to NFT integration trends, there is more value than just play-to-earn or metaverse economies. A wide variety of crypto apps could be scaled through NFT infrastructure. The upcoming crypto niche offers a foundation for DApps that are secure, which ultimately solves pertinent questions such as digital asset preservation and seed recovery.
While cryptocurrencies may have reached maturity, much more needs to be done in order to allow investors to rest easy knowing that they are protected. It is still murky for cryptocurrency wallets. It isn’t that there aren’t problems; however, newer technology like NFTs can help to solve many of them.