Research Report Review: Fireblocks and The Block Evaluate Digital Asset Custody Solutions

This festive season, consumers are eager to give the gift of cryptocurrency, with an estimated value 10% of Americans They are looking to buy a cryptocurrency, such as Bitcoin, Ethereum or Dogecoin, for their family members and friends. This surge in popularity also raises questions about custody of digital assets.

recent report,”Evaluate digital asset custody solutionsSearch by Bloc And with the authorization of fire blocks It explores and evaluates a range of custody options in the cryptocurrency space, highlighting that there is no “Bitcoin customer service department.”

Once digital assets are transferred from one party to another, the transactions are final and immutable. In 2014, one user accidentally Sending 800 bitcoins to the wrong addressShe did not confirm whether they had returned. This is why setting controls over how digital assets are stored and transacted, also known as “custodial digital assets,” is an important consideration for operators in the industry.

The Fireblocks and The Block report examines an important distinction between public keys, which can theoretically be used by anyone to send money to individuals or entities that control a public address, and private keys, which provide control over the digital assets themselves. This means that effective management of private keys is a major concern.

Due to the easily quantifiable financial risks and significant reputational risks associated with key management, a diversified landscape has emerged for digital asset custody solutions providers. The report points out how operators in the landscape can broadly be categorized as custodians, technology providers and hybrid operators.

The custodians manage the keys, and therefore bear the risks associated with any keeping. These trustees are usually regulated financial institutions, which means they are usually licensed under local residence regulations. Queen Piece Serves as a useful example of this model.

By contrast, technology providers offer software and hardware solutions that enable their clients to demonstrate security of their own assets. Fireblocks, an enterprise-grade platform that provides a secure infrastructure for transfer, storage and issuance of digital assets, exemplifying the technology provider model.

Meanwhile, the mixed service providers, such as BitGo, providing custodial solutions and also act as technology providers in providing solutions that enable companies to establish custody of their own assets.

While recognizing security, accessibility, and even security restrictions as some of the biggest challenges for operators, the report also points out a more important question to ask:

“Do we outsource safe custody of our business and/or client assets to the custodian (ie, sub-custodial)? Or do we partner with the technology provider to keep the assets securely internally (i.e. direct custodian)?”

The report examines whether the company’s needs are best met by outsourcing asset custody to a third party custodian or by partnering with a technology provider and retaining custody of their own assets.

By holding their own assets, companies can withdraw, deposit and transfer assets 24/7 and avoid the “closed-loop” nature of some subsidiary trust relationships, as they will be required to trade through a custodian’s place. This could be a critical factor in allowing companies to quickly and opportunistically spread capital into the fast-moving digital asset market—a measure that could be very limited if they outsource custodial to a third party that needs to be contacted to retrieve assets from cold storage.

Finally, the report concludes that in the short term, it will take significant time and resources for traditional companies to develop custody platforms and related products and services that rely on them (such as brokerage services for digital assets).

But in the long run, trillions of dollars in value are likely to be converted into liquid, tradable, and non-displaceable assets. As the report states, “All indications are that traditional financial firms, incumbent digital asset custodians, and technology providers all play an important role in this rapidly developing and competitive market.. “

You can read the full report here.

About the authors:

Searched by

The Block is an information services company founded in 2018. Its research arm, The Block Research, produces research content covering the digital assets, financial technology, and financial services industries.

commissioned by

Fireblocks It is an enterprise-grade platform that provides a secure infrastructure for the transfer, storage and issuance of digital assets. Fireblocks enables exchanges, lending offices, custodians, banks, trading desks and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-CMP wallet infrastructure. Fireblocks serves more than 725 financial institutions, has secured the transfer of more than $1.75 trillion in digital assets, and has a unique insurance policy covering assets in storage and transportation.

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