Asset custody platforms are categorized into full custody and semi-custody based on user control over private keys. Semi-custody usually refers to self-custody via MPC (Multi-Party Computation) wallets.
Full Custody
Full custody involves entrusting a user's digital assets to a professional custody institution or service provider for safekeeping and management. This model leverages smart contracts for the secure storage and custody of assets, boosting user productivity, enhancing asset management efficiency, minimizing management risks, and reducing operational costs. It is particularly suitable for institutional investors and digital asset holders.
Advantages of Full Custody
The main objective of full custody is to cater to the diverse and multiple usage scenarios of users. It offers:
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Security
Full custody hands over digital assets to professional institutions equipped with robust security measures like multi-signature systems and cold-hot storage segregation, drastically lowering the chances of asset loss or theft. For example, a large investment fund might utilize multi-signature technology, where multiple executives must approve a transaction, ensuring enhanced security.
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Convenience
Provides comprehensive services including asset safekeeping, account management, and transaction facilitation, streamlining user operations and boosting asset management productivity. For example, a platform that allows users to access various financial services through a single interface, improving ease of use and efficiency.
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Compliance
Professional custody institutions generally adhere to legal and regulatory standards, offering tools for compliance and Anti-Money Laundering (AML), thereby aligning with local regulations and promptly addressing business needs.
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Cost-Effectiveness
Assists in reducing asset management expenses, such as those associated with hardware, software, and staffing. By outsourcing asset management, smaller organizations can avoid the substantial costs of developing and maintaining their own custody solutions.
Self-Custody Services– MPC Wallets Custody
MPC wallet custody uses MPC technology for high-level security and protection of users' private keys. In this system, users retain control over their private keys, shared with the custodian, allowing complete asset control. Essentially, a private key is fragmented and managed by multiple entities, such as one part on the user’s mobile device, another in iCloud, and another with the custody platform, highlighting the self-custody aspect.
MPC Workflow
Advantages of MPC Wallet Custody
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Enhanced Security
Utilizes multi-factor authentication within the MPC protocol, effectively thwarting single-point attacks on private keys and ensuring that compromise of one participant does not lead to private key leakage. Even if a hacker gains access to one fragment of the key, the rest of the key remains secure, preventing total compromise.
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Privacy
Ensures the confidentiality of users' private keys, preventing any single participant from accessing the entire key, thus maintaining privacy. Each participant only holds a fragment of the key, ensuring that no single entity can view or use the entire key.
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Scalability
Facilitates the addition or removal of participants to align with varying user needs and requirements. As an organization grows, it can expand its MPC setup by adding more participants, thereby enhancing security and control.
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Complete Control
Users maintain absolute authority over their private keys and consequently their digital assets, ensuring full autonomy in asset management. Users can manage transactions and access their assets independently, without intermediary intervention.
Full Custody VS MPC wallet custody
| Full Custody | MPC Custody | |
| Security | High | High |
| User Control | Low | High |
| Cost | High | Low |
| Flexibility | Low | High |
| Suitable For | Users with high security requirements | Users who value both security and control |
Choosing the Right Custody Solution
Full asset custody may be more appropriate for:
- High-security requirement institutions, like financial and insurance organizations.
- Convenience-focused institutions, such as those needing prompt services, lacking digital asset management expertise, or high-net-worth individuals.
- High-compliance institutions, like those subject to stringent regulatory demands.
MPC wallet custody might suit:
- Privacy-concerned institutions, such as government bodies and corporations.
- Cost-sensitive institutions, including small and mid-sized organizations.
- Autonomy-seeking institutions, such as those desiring direct control over digital assets.
- Scalability-seeking institutions, like large enterprises or conglomerates.
In deciding between full custody and MPC wallet custody, institutions should weigh factors like security, convenience, compliance, privacy, scalability, and cost-efficiency. For tailored solutions, contact us for advice.
Learn more about full and MPC custody at ChainUp Custody.
