Now a trillion-dollar market, the crypto ecosystem has withered some of the toughest conditions within its period of existence. However, like any other technological innovation, it is not short of native challenges. This ‘lucrative’ market faces a myriad of shortcomings, including criticisms from regulators and long-standing financial institutions. But the most significant hurdles are currently attributed to the underlying infrastructures.
In a recent interview during the Paris Blockchain Week, Binance CEO Changpeng Zhao identified crypto custody as one of the hardest challenges that remains unsolved. According to CZ, the inaccessible and complex nature of crypto wallets is undoubtedly hindering mass adoption in the digital asset space. He was also keen to highlight that this one of problems he would prioritize given an opportunity,
“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.”
The Loophole in Crypto Custody
Anyone who has interacted with crypto long enough understands there is a thin line when it comes to storing the newly found wealth. Stakeholders have in the past lost huge sums of money as result of wallet breaches or forgetting one’s seed phrase. As it stands, 20% of the BTC in supply cannot be accessed due to lost private keys.
Is this efficient for an ecosystem touted as the future of finance? While Rome wasn’t built in a day, the issue of crypto wallets needs to be addressed sooner than later. Some crypto diehards would argue that non-custodial wallets are a long term solution. However, the complexities involved in securing one’s seed phrase paint a different picture.
“But today, most people cannot store their private keys securely. The wallets require them to be technical. Your computer cannot get a virus. If your computer gets a virus, there’s all kinds of problems that will happen. You will lose your money.” added CZ Binance.
Even worse, the current infrastructure of most non-custodial wallets does not feature a solution for passing heritage to future generations. 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. After all, this is standard practice in the traditional finance scope.
Unfortunately, custodial wallets offered by crypto exchanges are not any better; while they might feature a heritage structure, users are not in control of their private keys. In the event of a breach such as the infamous Mt Gox hack, chances are high that any investor holding funds with the affected exchange will have to incur significant losses.
So, what is the ultimate solution to a secure crypto storage ecosystem? 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.
NFTs; The Future of Crypto Wallet Infrastructures
The NFT hype has taken the crypto industry by a storm, with digital creatives such as Beeple cashing big on their work. Though a relatively new area of innovation, the indistinguishable (unique) nature of NFTs could be a game-changer in the development of non-custodial crypto wallets.
Emerging DApps such as Serenity Shield are implementing NFT technology to introduce a strongbox solution that addresses seed recovery and heritage issues. Launched in 2021, this Web 3.0 project features a fully encrypted solution for storing digital assets. Ideally, Serenity shield allows crypto natives to create an account where they can securely store their seed recovery phrases.
Serenity’s strongbox then partitions the sensitive information into three unique NFT keys. The first NFT is allocated to the account owner, the second to a prospective heir while the final key is stored in the Serenity Shield smart contract. To unlock the information in the strongbox, one requires at least two of the NFT keys, making it possible for a user to recover sensitive information or transfer ownership to an heir.
Going by the trends in NFT integrations, the value stretches beyond play-to-earn and the metaverse economies. There is a wide range of crypto applications that could benefit from scaling through NFT infrastructure. Most notably, this upcoming crypto niche provides a building base for secure DApps, ultimately solving pertinent issues such as seed recovery and digital asset heritage.
Cryptocurrencies might have come of age but there is a lot to be done to ensure that investors sleep comfortably knowing their assets are safe. As highlighted in the introduction, it is still a murky world for crypto wallets, whether custodial or non-custodial. This is not to say that existing issues cannot be solved; newer technologies like NFTs present an opportunity to tackle a majority of the underlying problems.