A friend asked me a sharp question after my Google talk:
“How will the world ever move from the custodial world we live in (banks, trading accounts, etc.) to a world where I have a single private key and really ‘own’ these NFTs?
Smart contracts and even soulbound NFTs assume we’ll all suddenly guard our private keys with our lives, only to be forced to follow every on-chain rule, fee, and restriction. Instead, I can just trust Coinbase (or whoever wins). I get convenience, the ability to sell to anyone, and I can skirt blockchain rules. Help me understand this.”
Here’s my perspective:
Business processes don’t change. Only the methods change.
For thousands of years, humans have happily owned assets beneficially while handing custody to someone else. We do it with money in banks, physical gold in vaults, real estate protection through government, stocks through brokers, art in galleries or museums. The vast majority of marketable assets with defined ownership are held by a separate custodian. (And perhaps even all valuable assets.)
When you give custody to another party, you lose direct control, but you gain offsetting benefits: convenience, security services, financialization, insurability, dispute resolution, and more.
Crypto is no different.
In 2018 we saw heavy self-custody for two reasons:
- Early adopters are a special group. They enjoy the risk, the ideology and the new value propositions.
- Many mainstream users who just arrived simply don’t know any better yet.
But humans as a whole have never valued direct, personal custody of assets as highly as the “not your keys, not your coins” crowd hopes.
The end result? Long term, nearly everyone will opt for custodial holding.
They will happily let Coinbase, a future super-app, or some trusted institution hold the keys while they enjoy:
- No need to guard a private key with their life
- Easy recovery if something goes wrong
- Lower friction for everyday use
Self-custody will remain important for:
- High-value operational “cold” holdings
- People with high risk tolerance or strong ideological reasons
- Specific use cases where trust minimization is worth the hassle
Expecting the entire world to suddenly treat a 12-word seed phrase like their most precious physical possession was always unrealistic.
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