Why Self-Custody
Shehzan Maredia
Founder
Why should one prefer self-custody over traditional centralized finance experience?
Risks with centralized finance
Centralized finance (CeFi) refers to financial systems where centralized intermediaries control users’ money. This includes banks (ex. JPM, Wells Fargo), online payment systems (ex. PayPal), and crypto exchanges (ex. Binance, Coinbase, Kraken).
When you use CeFi, you take on its risks:
Wealth confiscation. The centralized intermediary can confiscate your wealth.
Censoring. The centralized intermediary can censor you from moving your money.
Mismanaging. Your funds can be lost or stolen due to hacks, insider theft, or other security breaches; see the history of centralized failures post here.
Lack of privacy. When you rely on a central intermediary, you are sharing information about yourself and your financial holdings with that party.
There is, however, a solution to these problems that enables a financial experience which is not only safer but simpler: self-custody.
Self-custody is the solution
Self-custody is the practice of actually owning your own money, rather than relying on a centralized intermediary to hold it for you. In the context of digital assets (for ex. bitcoin, digital dollars), self-custody is important as it is the only way for users to manage their assets, with the only requirement being internet access.
A self-custodial financial experience is superior to CeFi:
Security. Self-custody gives users complete control over your money. You don't have to worry about a third party confiscating your wealth, censoring you, or mismanaging wealth.
Privacy. By actually owning your money, you can opt into privacy tools without permission.
Interchangeability. Unlike CeFi, if you don’t like your self-custody wallet provider, you can change providers without permission (thanks to the BIP39 wallet standard).
Accessibility. Currently, approximately 4 billion people don’t have access to a digital financial experience due to the difficulties imposed by traditional banks. Self-custody enables them to experience a safer, simpler, and more functionality financial experience with no KYC requirements. In fact, it’s likely that these 4 billion people will be able to avoid dealing with banks altogether and leapfrog to from physical finance to sovereign digital finance.
How can I start using self-custody?
At Lava, we’ve built a functional, safe and simple self-custody experience that serves you. You can get started by downloading the Lava mobile app here.
