During a Hedge Fund Association Conference in New York, Christine Sandler from Fidelity Investments said that a good custodian must have geographic diversity and knowledgeable staff. She noted:“To do it really well, you have to have geographic diversity, a staff that understands the underlying technology,”That means that people who can sign the multi-signature transactions across the globe, and knowledgeable of the blockchain trends. She thinks that the custodian wallet providers like Coinbase or Fidelity are the future’s “sub-custodians” for other custodians. This means that the companies will share the responsibilities. While one can handle the clients, the other one will handle the safety of Bitcoins. Per Christine:“Clients come to us and say ‘I want to expose 1 percent to 2 percent of
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During a Hedge Fund Association Conference in New York, Christine Sandler from Fidelity Investments said that a good custodian must have geographic diversity and knowledgeable staff. She noted:
“To do it really well, you have to have geographic diversity, a staff that understands the underlying technology,”
That means that people who can sign the multi-signature transactions across the globe, and knowledgeable of the blockchain trends. She thinks that the custodian wallet providers like Coinbase or Fidelity are the future’s “sub-custodians” for other custodians. This means that the companies will share the responsibilities. While one can handle the clients, the other one will handle the safety of Bitcoins. Per Christine:
“Clients come to us and say ‘I want to expose 1 percent to 2 percent of my portfolio to bitcoin.’ That’s a big lift in terms of accessing that liquidity. But it’s also a big lift in terms of how they are incorporating that into their portfolio, what evaluation tools are being used… what happens if the asset forks? Do you own the asset?”
As we see, there are many tough questions following the custodians on a path to subverting the classic venture and deposits system.
People Want to Create Content and Attract Visitors, not to Handle Payments
It is not a secret that many people can attract attention to coins and projects. Such people often serve as PR managers or content writers at different blockchain companies. Some of them lead insightful Telegram channels. But many dream of creating their exchange or a similar project that will feature Bitcoin or altcoins in the online wallet on a site.
Imagine you could pin Bitcoin wallet to your average online tech store. How many clients would prefer paying in cryptocurrencies or holding/staking the coins in exchange for discounts or bonuses?
The Key Problem of Small Crypto Businesses
The key problem here is the wallet’s security. Imagine that you’ve set up a service for your clients, involving cryptocurrencies. If then someone hacks your website, the coins may be taken away quickly. To avoid such a situation, classic exchanges use so-called cold wallets.
A cold wallet allows storage of the keys from addresses on an offline device, flash drive or even a piece of paper. What’s good about the cold wallets, is that hackers cannot hack them. What’s worse, is that an exchange’s “cold wallet” is typically its CEO storing the keys to all the coins in his bedroom. Maybe in the Bible or somewhere in a hidden place.
This means that, when you’ll have your business working with crypto accounts, you’ll have to do the same. Or, you can hire a “professional custodian”, who will manage crypto asset security for you. In such conditions, when you’re a creative person, not a tech-savvy computer engineer, you can focus on art and the math will be done by the mathematicians.
Jeff Fawkes is a seasoned investment professional and a crypto analyst covering the blockchain space. He has a dual degree in Business Administration and Creative Writing and is passionate when it comes to how technology impacts our society.