Web3 needs a user-friendly approach to self-custody crypto wallets — Here’s why

cointelegraph.com:

Once just a technical term within the crypto ecosystem, self-custody quickly took the main stage when FTX, a multi-billion crypto empire, went down in flames. The prolonged bear market, combined with bankruptcy announcements from once-prominent crypto exchanges, triggered a spike in crypto ownership awareness.

The domino effect of the FTX collapse was a harsh lesson reminding users of a fundamental principle in crypto: Not your keys, not your coins. Since the custody of FTX customers’ assets was on the exchange, users faced issues when they wanted to withdraw the funds they thought belonged to them.

To provide instant access to different forms of crypto trading, exchange-generated wallets take the responsibility of storing and managing crypto assets away from users. With responsibility, ownership of funds also gets transferred into the custody of the exchange. That’s why multiple experts advise users to keep their assets in a self-custodial wallet for “true ownership” over their crypto.

However, there was a reason for not seeing a massive adoption of self-custody crypto wallets before they became an absolute necessity — self-custody requires a certain level of understanding of how crypto actually works. This initial step became a deterrent for many users until more urgent matters emerged following recent developments in the space.

First, users need to create their own wallet, which is a different process than opening an exchange account with an email and a password. Second, they must understand the importance of their seed phrase and their private keys. Then they need to manually transfer their funds from all other wallets to the new wallet.

Since self-custody crypto wallets weren’t initially developed with the average crypto