Wearing your big girl and big boy pants: Why self custody of digital assets is so Important

The company we keep

The word ‘company’ is based on 12th-century French, compagnie, a “society, friendship, intimacy; body of soldiers”, and this hails from the Late Latin phrase companio, “one who eats bread with you”. Commerce was then, we can conclude, initially synonymous with social ties. At the heart of these social ties is the idea of trust.

Our current banking system implies or enforces trust — because you can’t have a bank account operating, yet disconnected, from a bank or a financial institution. Satoshi offered us an alternative: you could have a crypto wallet with no dependency on a third party, and independent custody of your money. Satoshi’s powerful insight, 14 years ago, was that contemporary fiat money depended on trust. That trust was political and technical. The alternative was based on a key concept, self custody.

The story of the past 14 years has been of crypto companies stopping you wearing your big girl and big boy pants and learning the art of self-custody. This has been done by creating custody patterns that replicate fiat currency to make it easy for you, a noble goal for any digital business. The cost of ‘easy’ is that these crypto businesses take a disproportionate amount of the rewards and functionality available to you, and they do this by having custody or quasi-custody of your digital assets.

As Shanghai approaches and the ability to withdraw funds completes the circle for the Ethereum staking, new capital in old companios will need to self custody their crypto assets to participate. Goldman Sachs, Natwest, Citibank, and the Nasdaq will not be using a staking-as-a-service platform or an exchange to stake Ethereum. They have the expertise to do custody for fiat currency and almost all other known assets classes.

Solo stakers trust no-one

At Launchnodes, we focus on enabling our clients to become solo stakers. We do this because we think the custody issue is central to what is so important about staking. You own your money, and never give custody or control of any kind away to anyone. Not because you are mean, but because the charges, exchanges, and staking-as-a-service providers that want you to pay, to trust them, are not suitable for businesses and institutions who want to participate in staking.

Staking is about contributing infrastructure and capital to the Ethereum network, in order to support the network. By providing infrastructure and capital to the network, and doing the work of updating everyone’s copy of the shared database (that is what blockchains are) and keeping the network secure, you get paid, with execution and consensus layer returns.

You have to own the infrastructure you stake on

Staking is not and should not be a magic financial outcome from a magic piggy bank. If you have 32 ETH or multiples of it and you don’t own the infrastructure you are using to stake, you have given custody of your funds away, you are being charged to trust someone else and in doing so you centralise the Ethereum network.

Ethereum staking at scale (multiples of 32 ETH) needs to be done as a solo staker to maximise returns. You have to own the infrastructure your nodes run on in order to:

  • Maximise the money you can make in execution and consensus layer returns
  • Learn about Ethereum as a network as it is today and as it changes (it is changing)
  • Make technical and business choices that relate to staking and optimising your returns
  • Decentralise Ethereum meaningfully.
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