Estimated reading time: 2 minutes, 23 seconds
Hey everybody, Jeremy here from Blockchain.wtf. Welcome back to Business on the Blockchain. We’ve previously covered one of the most popular cryptocurrency exchanges, Coinbase, and the several new services they rolled out in early 2018. One of those services was announced as “ Custody” which was designed to provide security services.
This is a such a new space, and with new investing opportunities. There is often great potential for growth, however that comes with a lot of risk. Of course with the stock market, this risk is limited to losing your money. This risk of course extends to cryptocurrency, but because of the blockchain systems behind cryptocurrency, there is another risk. LOSING YOUR PRIVATE KEYS.
Take care of those private keys!
Now this could be a huge deal for anyone who holds crypto. Your private key is like a master password, and whoever holds that controls your cryptocurrency. If you lose your wallet, it’s a minor inconvenience. You just have to restore the wallet using your private keys. You lose your private keys, you’re likely out of luck.
You’re clearly not going to memorize a complex private key, and even if you did what would happen if you fell on your head and had memory issues. This causes a lot of people to create a physical copy of their private keys.
Now I was just talking about individuals, but as we have explored in this very series, more and more institutional investors are starting to explore cryptocurrency as a strategic investment. Of course, the same risks of having their private keys compromised is the same of individual investors, except they are probably holding a lot more money with a lot more at stake. Imagine a situation where a corporation loses their private keys. It would probably look a lot like the Parity debacle where a corporation would completely lose access to their funds. In short it would be a disaster.
Enter Coinbase Custody
Coinbase Custody is a service to act as private key custodians for hedge funds and other investors. Obviously with the relatively new technology, institutions are going to have to have some type of assurance of security before they invest. And you can bet that there is going to be some massive insurance policies involved in case anything goes wrong.
Coinbase Custody’s job is to provide peace of mind so that these companies can go forth into the cryptocurrency world, and that’s a huge service for this space. These custodial services are necessary for institutional capital to come into the space. Investors wouldn’t even consider cryptocurrency because of these security risks. In a short time, that has changed on a very macro level. Now Coinbase Custody is providing security services that allow more money to get into cryptocurrency and that is certainly advancing business on the blockchain.