Building a competitive edge in the cryptocurrency industry – the custodian of tomorrow
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Having the opportunity to be part of building from the ground up in a brand new industry like crypto is a dream come true. I still pinch myself when I realise that so many people share the same vision and have entrusted me with their time, careers and money.
I founded Trustology in 2017 as a ConsenSys spoke and spun out in 2018 as an independent, investor-backed entity. My vision and mission was simple. Through people, process and technology – build solutions to address the very real concerns that stand in the way of widespread blockchain adoption, now and in the future. This extends to safeguarding digital assets which we prioritised addressing.
The start-up life is a little different to traditional financial services for good reason. Big banks simply cannot and should not take the same risks that startups can and should. They have many established processes, foundations and teams in place that magically take care of things. Often the need is clear, you just need to navigate the layers of management and controls to get things done and that’s often a big challenge.
With startups, there are no magic fairies. If you don’t know who is doing something, then my best advice is to look in the mirror. Every little detail is down to you from buying fruit to keep your team healthy, to building up your brand, teams and clients to lean on for roadmap decisions. Nothing is yet foundational to springboard off of. Everything is down to you to build and drive, which is both scary and amazing.
As a start-up founder you are super close to the ground, really getting to understand how vital your client is. Unless you are bringing value to them, your business is dead. That value may not always be by mind-blowing technology, which helps, but rather it can be excellent customer service, advice you offer, costs and time you save them or the business opportunities you unlock for them.
You also quickly learn that brand matters. Those who took the risks and successfully dominated markets that others dismissed or gave up on have a massive first successful mover advantage. If you are coming in from behind, you better offer something different that serves customers better. This could be the same offering but cheaper, for example, or a similar offering but one that addresses a changing landscape i.e. just like the current incumbents you need to identify ‘whitespace’ ahead of others, and hope that you placed a bet that works out and you are able to dominate the space quickly enough.
From Custodial Wallet to Full Custody Platform
Take crypto custody for instance. In the early days, it was somewhat ridiculed. The whole point was that you kept your own keys. But turns out that is hard, and folks do want someone to help with it. Early innovators saw the opportunity, held their nerve, and built great businesses off the back of it. At the time, the asset value was skyrocketing, so most investors simply relied on long investment strategies. Hence, cold storage i.e. keeping keys in vaults, was good enough. It was also the only solution that could be insured. The traditional crime insurance market was not ready to allocate capacity to crypto custody, and only the specie market was happy to do so, as long as keys were vaulted offline. Sure it is slow, but it is insured, and no one was in a hurry when HODLing.
One thing that does not change is the fact that change is inevitable. As asset prices stabilise, investors seek better returns i.e. earning interest off the back of lending, staking etc. They look for deeper liquidity, smaller fees, and lower risks. Now that crypto is more established, funding trading in crypto versus fiat is more popular, so is margin trading, and the need to meet crypto margin calls quickly. Suddenly, scale and speed matter as much as security.
That was the bet we made at Trustology with our TrustVault solution. We did not want to build another cold storage solution. We wanted to be solving the next problem i.e. crypto custody in the fast lane. With crypto funding of trading accounts, comes the headache of managing millions of keys, and transacting real fast. Manual operations are too expensive and cumbersome, and for that automation is needed – so you better offer fast and scalable APIs, which we do.
Conquering DeFi
Even in the time we started our journey, yet another paradigm shift occurred – decentralised finance (DeFi), or as some call it ‘open finance’. It promises lower fees, lower risks and deeper liquidity than traditional financial services by offering trading, lending, hedging etc. But DeFi is an even bigger challenge from a custody point of view. In addition to speed, you need to be able to support an almost infinite number of protocols, do so securely and in real-time with segregated keys and controls fit for institutions.
Thankfully, we designed a solution that has all the ingredients to work well with DeFi. Unlike cold storage which relies on omnibus addresses, our technology scales to support segregated keys in real-time. We inject checks like access controls, multisig approvals, whitelists, compliance etc.
With our MetaMask fork, we can be used essentially ‘out-of-the-box’ with any Ethereum DeFi protocol. When looking at how far DeFi has come in such a short period, it’s exciting to envisage where it’ll go. The upside for DeFi, in my perspective, is almost limitless. That is why we’ve made the strategic decision to actively support DeFi so that our clients can be safe across any facet of crypto and blockchain — on-exchange, on-chain and now when working with DeFi protocols.
Concluding Thoughts
What I’ve learnt from being part of this ever changing, fast paced industry, is that it is super important to be adaptable and design adaptable systems. The other lesson is to focus on the positive. All too often custodians focus their marketing on preventing the downside, i.e. don’t lose your money. That is, of course, a keystone of the offering. But from what our clients tell us, the bigger focus is on the benefits partnering with a custodian brings such as reducing risk and automating day-to-day operations, freeing up their time to focus on what matters – maximising their returns, with existing funds under management to attract more assets from investors.
In the end, all I am saying is something that everyone instinctively understands but easily forgets. Look after the people entrusting you with their care. This means working with them and really listening to them to understand what is truly best for them to then act in their best interest. This extends to customers, investors, partners and employees.