Asset storage has always been a prominent issue in the cryptocurrency space. With the industry gaining more mainstream attention, it is worth understanding what drives users now more than ever.
In a new report, Binance Research found that most crypto users feel more comfortable allowing exchanges to custody their assets.
Exchanges Beat Self-Custody
Dubbed the 2021 Global Crypto User Index, the new report provided insights into a study that encompassed 61,000 crypto users from 178 countries and regions worldwide between September 15 and October 25.
Binance Research explained that crypto had become incredibly popular amongst holders, with 52 percent seeing it as a significant source of income.
Another 55 percent claimed to own cryptocurrencies as part of their long-term investment strategy, while 39 percent entered the industry to take advantage of its healthy status and grow their wealth. 22 percent of investors are in the space for staking and lending.
Turning its focus on custody, the report shared that 60 percent of respondents would rather have exchanges store their cryptocurrencies for them. This trend shows that exchanges remain more popular than self-custody, probably thanks to their relative ease of access.
Holding cryptocurrencies in a personal wallet can open you to a world of risk, including losing access to credentials or having someone hack the wallet directly. In most cases, loss of assets is the user’s responsibility.
Wallets are also notoriously difficult to understand – especially for novice crypto holders. With so many terminologies to consider, investors would pretty much prefer to have someone else hold their assets and secure them.
The growth in trust for exchanges now puts more pressure on trading platforms to improve their security infrastructure. The security systems for most of the top trading platforms has improved from their 2017 levels. Earlier this month, blockchain analytics firm CipherTrace reported that crimes targeting the crypto sector fell by over 50 percent last year.
Losses from crypto theft and hacks hit $1.9 billion in 2020 – down from $4.5 billion in 2019. CipherTrace credited centralized exchanges’ improved security infrastructure for the decrease, pointing to it as another sign of the crypto industry’s maturity.
On the flip side, the developing decentralized finance (DeFi) space saw a surge in criminal activity.
“Half of all 2020 crypto hacks were of DeFi protocols—a pattern that was virtually negligible in all prior years—and nearly 99% of major fraud volume in the second half of 2020 stemmed from DeFi protocols performing ‘rug pulls’ and other exit scams in a pattern eerily reminiscent of the 2017 ICO craze,” CipherTrace reported.
With the space also expected to mature significantly this year, it is expected that security infrastructures will improve.