The collapse reminded people that self-custodying your own digital assets, by keeping the cryptographic keys (on their own computers, or a hardware device disconnected from the internet, or even written on a piece of paper locked in a safe), would spare consumers from being burned by schemes like FTX, said participants at Consensus 2023. The conversation about trusting centralized bodies with crypto keys returned to the limelight after the implosion of FTX, with several million customers still waiting to reclaim crypto assets worth between $1 billion and $10 billion.
Crypto purists have long argued that self-custody is the only way to go and that having control over one’s own keys avoids the perils of centralization. But crypto users have often observed that custodying one’s keys is nerve-wracking, as there are few recovery mechanisms in place if users lose their keys. A closed-door roundtable conversation at Consensus 2023 looked at how policymakers can create effective guidelines for consumer protection without undermining, and perhaps advancing, the crypto ethos of controlling your own assets.
The challenge is acute. A poll question posed to the broader Consensus audience revealed that less than 10% of crypto users were competent and comfortable storing their own keys. The private discussion at Consensus tackled the question of whether centralized institutions will always play a massive role as custodians for the industry.