Sid Powell, CEO & co-founder of Maple Finance, joined Closing Bell to discuss crypto investors' decreasing trust in major exchanges following the FTX collapse, with a growing shift toward cold storage, which secures assets in an offline wallet.

Shift to Self-Custody of Crypto Assets amid FTX Collapse Fallout

And the recent collapse of crypto exchange, F T X has sparked concerns about the security of investors digital assets. So when investors keep their funds in an exchange, they can only be accessed if the exchange is able to distribute it to you. But if funds are hacked or mismanaged, you really could lose everything. So now we're seeing growing calls for cold storage which allows users to secure their funds in an offline wallet. And I'm joined now by Sid Powell Ceo and co founder of Maple Finance defi, institutional capital marketplace said thanks so much for coming. So talk to me more about cold storage and why it might be a popular option right now. Yeah, thanks for having me on. It's great to be here. Uh So the thing to know about cold storage is this was the this was the way that coins were originally stored in in crypto in its earliest days. So, to separate out what that actually means, think of cold storage like on the Blockchain, you effectively have a lock box and cold storage is having your own keys to access that lockbox. So the most common ones are ledger and tracer. But what it means is effectively that you are the only one with the keys to access those assets. And we contrast that from hot storage or hot wallets, which are where your funds are actually held in an exchange. And what happened was that was really favored. So hot hot wallet storage in recent years because of the ease of access and the speed with which you could use your funds. But what we've seen in recent months is a shift back to an emphasis on self custody because it's the only way you can ultimately trust that your funds are there, as the only way that you can be sure that they're not being used for other purposes. So particularly with the recent collapse of F. T. X, we've seen a lot of people shift their funds off of exchanges and bring them back to cold storage, which is ultimately self custody, but I do want to just specify here sid even though it is self storage self custody, if you will, I mean it can still get hacked right? It can of course. And so this was one of the reasons that people shifted shifted to hot wallets was that they felt it was ultimately more secure because you could rely on the security of an exchange. So the risk of self custody or cold wallet storage is that you have to you know, write down your password and keep it in a secure place and make sure that you're not going to get hacked. So the ways that it does get hacked in common things to be aware of is look out for anyone pretending to be either a support team from an exchange or a protocol or from ledger or treasure itself, those teams will never contact you and that's often a common route that people might get scammed through. And the other one is of course saving their passwords online, whether it's in an email inbox in a G. Drive or in a password sharing sharing application. Typically the best thing to do is to write them down and keep them securely in, you know in either a safety deposit box or a secure place at your house or somewhere else so that it can't be hacked by via your email. Now we have yet to see whether or not people who invested in FT X will be able to reclaim any money whatsoever down the road. But I'm sure with self custody and cold storage said basically you take on the liability yourself right? If that money disappears, if it's hacked, if it's stolen, no one else is responsible except for you. Is that right? That is right. And so that's ultimately the thing to be mindful of is that ultimately, you know not your keys, not your coins, but when you self custody, you have to be very careful about where you keep that that seed phrase or where you keep your your ledger or your treasure because it's ultimately your responsibility. Um And so that that is why people felt that it wasn't necessarily the right solution for your average moms and dads who might be holding holding crypto what's your take on the collapse of F. T. X. And Sam bank man freed is someone who is a Ceo and co founder in the world of crypto, what should we know about this. Yeah. So I think the thing that everybody is keeping an eye on at the moment with FDX is uh the thing that the thing that really shocked everyone in the space was that F. T. X. Was really regarded as almost investment grade by people who kept their funds on there. So it was a very trusted brand and platform and uh you know, they've done a lot of work to build that reputation within the space and we've seen that collapse in a matter of days. And so the thing that people will be keeping an eye out for is we will have the creditor list coming out within the next few days and everybody is going to be closely following ah who is on that list and looking out for signs of contagion. And then we should also expect to see a lot of questioning and deep dives into how customer funds were used on the platform because that was really the kind of the smoking gun that came out of this. Uh and that and that catalyzed a lot of the catalyzed the speed of the collapse is that customer funds were being used without their knowledge in trading operations by Alameda. So expect to see a lot of questioning. And I think that, you know, we've seen that they've been summoned to the hill for for a session on that and that's what it will focus on, what does this mean for the broader crypto space and public trust or distrust in the crypto sector? I think it definitely it's definitely damaged public trust in the space. And I think that will take some time to recover. But I think ultimately, what we shouldn't lose sight of is the great technology that is being built in the space. So you've seen that defy held up relatively well and that what we could see is that it showcased the importance of transparency and self custody. And this is something that people have, people have noticed and referenced in the space since then. So I think we shouldn't lose sight of the technology that's being built and shouldn't let the actions of a few bad actors tarnish what is a very innovative space. All right, Sid Powell Ceo and co founder of Maple Finance Sid. Thanks for coming on the show.