• The collapse of FTX crypto exchange and other related companies in 2022 and 2023 led people to self-custody their coins.
• Ledger saw its most successful month ever in November, selling 1 million units between June 2022 and February 2023.
• However, self-custody poses a user experience problem due to the risk of forgetting or losing wallet recovery phrases.
FTX Collapse Pushes Users to Self-Custody
The collapse of FTX crypto exchange pushed many users away from exchanges and into storing their own crypto – but the potential of human error remains. FTX was not alone in creating this trend as Celsius Network, Three Arrows Capital, Terra, and other crypto companies failing in 2022, as well as the March 2023 banking crisis contributed significantly to leading users to self-custody. Such users now store coins themselves with interest-bearing peer-to-peer contracts or personal wallets following the mantra “not your keys, not your money”.
Ledger Sees Most Successful Month Ever
Ledger saw its most successful month ever in November – selling 1 million units between June 2022 and February 2023 – amid the bear market and regulatory pressures according to its CEO Pascal Gauthier. In total, Ledger sold 5 million units over eight years prior to this period.
Challenges of Self-Custody
However, Director of Security Operations at blockchain security firm CertiK Hugh Brooks noted that self-custody poses a user experience problem due to the risk of forgetting or losing wallet recovery phrases. To solve this issue, Ledger is working on launching ‘Ledger Recover’ which splits a recovery phrase into three encrypted shards and gives them to custodians: Ledger itself plus custody firm Coincover & code escrow company EscrowTech.
Risks Involved With Self Custody
Brooks warned that people forget or lose their wallet recovery phrases often storing them in insecure locations making it difficult for average users when it comes to managing their funds safely via self custody methods.
Conclusion
Despite these risks involved with self custody methods many users have had no choice but turn towards this option especially after events such as the FTX collapse last year have caused them financial losses from trusting centralized entities with their funds instead of taking control into their own hands.