Cryptocurrency custody solutions are one of the most recent innovations in the digital currency space. Read on to know more about them including how bright their future is.
In simple words, when the third party providers offer security as well as storage services for digital currencies, they are referred to as cryptocurrency custody solutions. These services are primarily meant for institutional investors like hedge funds that own big amounts of cryptocurrencies like Bitcoin.
The cryptocurrency custody solutions typically comprise of a mix of crypto custody, or hot storage with Internet connectivity. They also incorporate cold storage that is not connected to the Internet. Since the hot storage enjoys Internet connectivity, it provides easier liquidity.
On the flip side, a hot storage is susceptible to hacks because of its online exposure. As opposed to that, a cold storage solution offers a higher level of security but may not support easy liquidity for crypto holdings, especially on a short notice. The limitation is because cold storage cryptocurrency custody is offline in nature.
A combination of both hot storage and cold storage cryptocurrency custody solutions is referred to as vault storage. Here, most of the crypto funds are stored without the Internet connectivity. A private key is required to access the vault storage
Way Ahead For Cryptocurrency Custody
According to a report by Investopedia, the future of cryptocurrency custody solutions looks bright with the entry of prominent names like Goldman Sachs. Entries of big players like this can be a big boost to this nascent market. Things are already looking bright with companies like Fidelity Investments and Coinbase also entering the fray.
cryptocurrencyOn the other hand, there is a lack of proper clarity in the regulations at present. The current regulation does not mention security provisions with respect to cryptocurrency custody solutions. Businesses still lack clarity about the regulations related to digital currencies. The ecosystem can only evolve once the regulators set guidelines for the field.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]