Self-custody might have been the most popular crypto term in the latter half of 2022 following multiple macro developments in the industry, and for good reason. The concept of self-custody, also known as self-ownership, is hardly novel amongst crypto enthusiasts, but there is no denying the newfound focus on self-custodial provisions with crypto offerings — the importance of self-custody has finally been embedded into users' consciousness as an indispensable safeguard in their day-to-day trading activities.
The foundational principles and overall benefits of self-custody are very much aligned with that of decentralization and decentralized finance (DeFi) — and is typically a key feature on products and platforms for trading, lending and more. On decentralized exchanges (DEXs) in particular, self-custody has evolved from a key feature to an incompromisable promise and commitment to its community and users.
Here are five reasons why it is vital for crypto users to fully control their assets and funds, and why this is a pre-requisite for DEXs:
Ownership
Your funds, your assets, your earnings, and your keys — it is expected that a user will have complete control over and access to their funds at any given time, be it with their fiat and cash, or virtual assets. What this means is the right to freely withdraw, deposit and transfer their money, and that no third-party platform or intermediary will be able to cut off or restrict a user's access to their funds, even if they have been deposited on a separate platform.
Self-custody is the last line of defense for crypto traders. Unpredictability may abound in the crypto and DeFi-verse, but having access to your funds despite that, is the most powerful value proposition that products and platforms can put forth in 2023.
On DEXs such as ApeX Pro where the platform does not hold a user's funds at any given point in time, additional safeguards have also been put in place by way of StarkWare's integration. Even in the unlikely event of downtime on ApeX Pro, users can easily put in requests to safely withdraw their assets, even without the faciliation of the platform. Everything is under your control, only when you trade on ApeX Pro.
High Security With Removal of Unnecessary Risks
Being fully responsible for your funds cuts down third-party risks everywhere else. When choosing a platform to trade on, one no longer has to worry about worse-case scenarios — what happens if the platform is down, or are there any potential legal troubles it might face that would lead to a seizure of assets, resulting in your capital loss? With self-custody, all that matters is the digital wallet you pick and how well you keep your private keys safe.
Choice & Flexibility
Choose to transfer, trade, stake and more on one platform or across multiple offerings with greater flexibility and freedom, or even switch between digital wallet providers to find the best way to utilize or hold your assets. Having an independent bag of funds separate from the platforms allows one to autonomously manoevre between different trading strategies and product offerings without interference.
Lower Costs
A common consideration that comes with custody of funds is cost. Having an intermediary store your funds can be costly depending on the platform, and additional costs can be incurred if you choose to make transfers, deposits or withdrawals across different chains and networks. You may not always be able to access the cheapest option available, simply because the platform holding a portion or a majority of your funds does not offer them. Full autonomy over your funds affords you the freedom to make a practical choice when it comes to costs at any time.
User Independence
Define financial ownership and wealth growth on your own terms as the Web3 world moves towards increasing independence, placing full financial responsibility back in the hands of the individual. Self-custody requires more involvement on the user's part where they may be used to leaving everything in the hands of the third-party, such as a bank, but the practice empowers a user to be more cognizant of how they manage their assets. In the long term, we will nurture and cultivate a new generation of individuals who, and communities that will personally take charge of growing their assets while keeping them safe at the same time.