The title of this article may seem confusing for some. Who out there is leasing cryptocurrency? Is that even a thing? Do you mean NFT scholarship systems?
In order, the answers are: more than you’d think, yes, and no.
This is because many crypto hodlers and investors don’t actually own the keys to their wallet, they rely entirely on a centralized entity for custody of their coins. In a flash, the company can go bust and you have no control, let alone legal claim to the crypto you previously presumed to own.
When everything goes right this system works well. But it doesn’t always run perfectly.
Remember when Celsius boasted about how many crypto downturns it survived in a blog post only to days later freeze withdrawals amid “extreme market conditions”? None of their 1.7 million customers could access their funds in any way at all. You’d be forgiven for developing trust issues.
It quite simply would not happen if people refused toput their trust in such lenders and exchanges. In an ideal security situation, hardware wallets with cold storage — not connected to the internet — would be much more common than they are. These offer the ultimate in self-custody, because it’s nigh on unhackable and importantly, no centralized body can freeze your funds.
Only the unrealistic, anarcho-liberatarian crypto evangelist would suggest this is at all plausible when extended to the masses. Centralized exchanges offer a very valuable service and, in some cases, even provide insurance or coverage for stolen funds.
A decentralized solution with centralized aspects might be the play here. You can achieve the best of both worlds by leaving the issue of custody with the user, but introducing CeFi as a way to give a robust entry into the crypto world inside a large community.
Predictably, centralized finance is winning in crypto. It’s a lot easier to use, and also offers protections where decentralized finance doesn’t: self-custody is inherently fraught with danger and the user has to retain some level of sophistication and knowledge to navigate this world.
The space needs to evolve to better solutions which don’t make people choose between poorer security and losing custody of their cryptocurrency. Perhaps the average user needs to evolve too. But until DeFi is as easy as using the internet, expect noob-friendly CeFi to dominate.
