What is crypto custody?
What does crypto custody mean for corporations and businesses, and what enterprise crypto custody options are available to you
The crypto world can be a space where whacky phrases confuse new entrants. One phrase you might have heard is “crypto custody.”
While it’s not thrown around as often as Metaverse, NFTs or DeFi, it’s actually one of the most important concepts to understand if you’re a crypto investor.
In this article, we want to provide an overview of this term and why it matters for anyone investing in the space, whether they be retail or large-scale institutional investors.
What crypto custody means
Crypto custody refers to the action a crypto currency holder takes to secure or store their private keys (and tokens).
There are various considerations when it comes to choosing the right crypto custody option: asset security, accessibility, delegation of private key signing rights, and partial to full control of digital assets to third parties.
Crypto custody is a totally different ball game compared to custody of other assets. When thinking about custody of existing assets such as gold, holding custody of an asset at home (using a safe and keeping items in a secure location) could seem riskier than keeping it in a vault at the bank. These are examples of self-custody (home) and using a custodian (bank).
Thankfully, it is easier to hold crypto in custody than other assets like precious metals. With mobile applications, browser plugins and seed phrases that make self-custody accessible to anyone wanting to hold their own keys, secure crypto custody can be as simple (or as complex) as you choose.
Different crypto custody options
Crypto custody can be done in many different ways, each with slightly different pros and cons. Here are the two main ones:
- Self-custody: This is where the beneficial owner of a digital asset holds their own private keys, whether they use a physical hardware wallet or a mobile app. They are the only ones with access to their private keys. This allows anyone to be in full control of their assets. However, security is only as strong as the individual or corporation chooses to make it.
- Third-party custody: This is where another entity holds your keys and coins, such as an exchange. In this case, there may be delays in sending or transacting, as a third party controls your held assets.
Unido’s Multiparty Computation (MPC) solution fits into the above as a self-custody solution, providing wallet users with control of their own keys. MPC multi-sig allows users to delegate control of their keys to multiple signatories, distributing the responsibility of managing the assets to those signatories, rather than a single person.
Why crypto custody matters to SMEs
Every other week there is a story about an individual or organization being ‘hacked’ in the crypto space. Unfortunately, what really happens is their keys are exposed in some way (stored incorrectly or put in the wrong hands), leading to their assets being ‘stolen’ or ‘hacked.’
Private keys allow the holder to approve transactions and send funds from a wallet. Storing these keys should be a priority, as anyone with access to these keys can essentially control all assets stored within a wallet.
Having a strong key management system in place can prevent these ‘hacks’ from happening. However, crypto custody is sometimes not given the respect or priority it deserves, falling to the wayside when accounts and wallets are set up in the first place.
There are also a number of ways in which crypto can be held and stored, such as cold wallets and hot wallets, with each allowing different security and accessibility levels depending on the holders’ needs.
Ultimately, to safely protect crypto holdings, using a custody solution can greatly reduce the stress (and consequences) associated with holding your own keys.
Crypto custody for small and medium businesses
Many readily available crypto custody solutions can help individuals and small-to-medium businesses alike in the management of digital assets. Other products include providing partial control over cryptocurrency keys within multi-sig options, with various degrees of security and availability of assets.
These solutions vary in cost and complexity, and can often involve huge setup costs. However, our solution, Unido EP, provides a plug-and-play option that enables transaction flexibility, along with the security of a distributed key architecture.
Unido’s proprietary, patent-pending MPC (Multiparty Computation) algorithm allows keys to be broken up and stored with different key signatories. Your assets are accessible 24/7 while also being protected from hackers.
In the future, we’ll also be adding a suite of business tools to help small and medium enterprises further refine and customize their governance processes and permissions. You can check out our roadmap here.
Choosing the right crypto custody solution for your small or medium business
If you’ve already decided that crypto has a place in your organization’s future, exploring crypto custody options is likely your next step.
Read more about how to set up a Unido EP wallet here.
About Unido EP
Unido EP takes the complexity and expense out of digital asset management for organizations with sophisticated corporate governance needs. Our patented, end-to-end platform seamlessly automates corporate governance and self-custody of crypto assets so you can securely store, manage and invest in crypto without massive overheads.
Unido EP comes with a web-based dashboard and a decentralized application (dApp) featuring a robust set of DeFi tools, easy-to-set-up authority regimes and iron-clad security. All of this is inside a complete digital asset management platform, built with financial institutions in mind but tailor-made for any organization or individual’s needs.