The Law of Private Keys has long been a part of the crypto and crypto investing conversation, and is actually connected back to the original ideal of crypto creating a non-fiat financial system that did not require centralized intermediaries. The explosive growth in total value locked (TVL) on Ethereum is indicative that this is a realistic option going forward.
DeFi applications, particularly those that are truly decentralized and not governed by a central body or board, might very well be able to capitalize on the need for some crypto market participants to maintain greater control and custody of the cryptoassets in question. Linking back to an earlier point, the potential need to offer different services to crypto investors depending on expertise and experience is a realistic outcome. How this will evolve in terms of regulatory and legal protection still remains an open item, but there is one angle that is worth exploring further. In essence, what DeFi applications are attempting to do is replicate many of the functions associated with banking institutions without requiring those very same institutions. Perhaps most interestingly is that the rise of centralized crypto banking, product, and trading services might actually benefit the rapidly growing DeFi space. To put it another way, crypto trading and investing is already a volatile endeavor heavily influenced by headlines and macro factors cybersecurity around such activities will need to be up to the task.ĭecentralized finance (DeFi) will benefit. That said, the continuing lack of investor education and experience with crypto related trading issues, and the ability of retail investors to perhaps inadvertently gain more exposure than realized via margin loans and the like could potentially compound this concern. Clearly the issues around trading and asset management are not limited to crypto based institutions, with fiat based institutions also experiencing an array of problems. Growing pains and cybersecurity concerns exist for any fast growing sector, and there have been any number of incidents in the crypto sector that point out just how critical addressing these issues continues to be.
Such differentiation in both institutions and services provided by providers can already be seen the rise of state specific legislation like in Wyoming, or by the launching of digital asset banking institutions.Ĭybersecurity risks will rise. Offering crypto banking services to retail investors and the mass market is one thing, but in order to secure endorsements and buy-in from sophisticated investors in the space, there may eventually be the need for multiple custodial options.
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