The Inevitable Future of Digital Asset Custody - TOKEN2049 Singapore 2022

did you know that digital asset custody actually accounted for 20 of the total funding going to the blockchain space in just 2021. you might ask what is digital asset custody and why is it important digital asset custody is often referred to as the safe keeping of digital assets of customers and it lays foundation for a whole Suite of services to flourish such as Exchange Bank Prime brokerage accounting just to name a few it is widely regarded as the gatekeep get as the gateway to institutional adoption of crypto let's take a look at this market and see how big it is as we can see on this chart in the past three years the total asset on custody has increased a dramatic 600 percent to cross over 200 billion US dollars and this has caught the attention of global of Global Investors who pumped in more than 4.5 billion US Dollars into this space in just 2021 so clearly there's a huge interest and demand for digital asset custody but in this fast changing blockchain industry you might be wondering where is this Market going in the next few years a perhaps more interesting question to ask is where what are we ignoring today that might seem shockingly obvious in a few years later so this is the question I want to discuss with you guys I'm Chang I'm the co-founder and CTO of Kobo which is the largest digital asset custodian and blockchain Technology provider in Asia Pacific I entered the crypto space in 2013. when I founded China's first Bitcoin wallet almost 10 years ago and since 2018 we started building infrastructure to power crypto Enterprises and now we are serving more than 500 institutions and high net worth individuals in Asia Pacific so in this talk I'm gonna share with you guys our perspectives on the following topics first what is the what are the forces behind the development of digital asset custody and what we think will be the future of digital asset custody and what is the ultimate form of digital asset custody so to understand that the role and development of digital as a custody we introduce a trinity model where custody is at the center of users applications and block and Technologies so because in the past few years it has become more and more clear that these are the three main driving forces behind the development of digital asset custody so let's dive into each of them first on the user side in the past few years we have seen rapid adoption of crypto in 2021 just one year alone the number of crypto owners has almost tripled from 106 million to 295 million users and now the total number of crypto owners is estimated to be over 320 million users and more important than the number of users actually is the type of users has also dramatically changed from cyberpunks and programmers in the early days to ordinary retail users nowadays and more and more large cooperations and financial institutions have also jumped into this world and we are also witnessing a large number of crypto native organizations like Taos and crypto funds which are very popular these days so clearly there's a so for the custodians they need to cater to the varying requirements of new user groups and second let's take a look at the technology so in the past few years the underlying technology in the blockchain space has also evolved very quickly since the introduction of Bitcoin in 2009 to the invention of smart contract on ethereum in 2015. and to all kinds of alternative a smart contract based blockchains like cardano and Solana Etc so it is clear that we in the future we're gonna see more and more later one blockchains and application specific blockchains and even modular blockchains with layered Road labs so all this presents new challenges for custodians they need to understand they need to keep up with this new technology and help their users to to navigate and leverage on these new technologies and thirdly we have seen an explosion of blockchain applications before 2020 the main applications around crypto is very simple just mainly just crypto exchanges and wallet providers and payment services but since 2020 smart contracts have actually filled the explosion of blockchain applications in 2020 we it was all about D5 and 2021 and navt was taking the world and this year it seems Dao is becoming the next big thing in the crypto space and right now with more than 4 000 D apps it is clear that web 3.

0 is going mainstream so forth what this means for custodian is that they also need to understand the changing landscape of the blockchain application space and be able to help users to interact with these applications so with this changing fast changing nature of users applications and Technologies it is clear that not every organization in the world is able to build their own digital asset costly solution so most of them resort to professional or experience the custody providers but now the the conversation between custody providers and customers has changed from can you help me can you really secure my assets to how can your service best help me to interact with the whole ecosystem so with this changing conversation we make four predictions on the future of digital asset custody as compared to the following aspects of digital asset custody of today I'll go over them one by one so prediction number one is that digital asset custody of the future needs to provide full stack solution instead of just focusing on the secure key storage as we know that blockchain applications are built on top of a full layered stack from blockchain to Smart contract to protocol and to application layers and in the past few years we've seen that each of the layers has become more and more complex so custodians are expected to understand the workings of each of these layers and provide a seamlessly integrated solution to their users to be able to interact with the applications and prediction number two is that custodians are expected to provide a unified user experience especially in the multi-chain environment it is clear that blockchain world is moving into a multi-trained multi-layered environment we will see more and more layer 1 blockchains application blockchains and layered roll apps and each of these chain or low lab might have its own applications users and assets from users point of view the user experience is very fragmented so they require a Consolidated and unified user experience to enter this space and prediction number three is that custodians are expected to adapt the existing retail user-oriented infrastructure into a more programmable and more institutional friendly solution as we mentioned earlier more and more organizations and professional teams are entering space and the demand for highly customers uh highly customizable solution to cater to their internal workflow needs and risk control policies will continue to rise and prediction number four which is the last but not least is that custodians will move towards full decentralization as we know that custodians of today most of them are centralized infrastructure based so this has the benefit that it's much easier to implement uh solutions to integrate their legacy systems or even customizable workflows however this posts the risk of a single point of failure so as a result many custodians have tried to decentralize their key storage by taking advantage of latest Technologies like MPC or body stick wallet multistig wallets however we think that decentralization of key storage is the only first step to achieve Ultimate Security and transparency it is important to decentralize every layer in the stack from Key storage to access control and even to application entry points so with these four predictions in mind we looked at the existing Solutions on the market and try to see if there are any solutions that might be more promising in tackling these challenges however we didn't find any ones uh one solution that can handle all these challenges and there's a very interesting um area called decentralized custodian which seems to be on the right direction but we found there are some fundamental flaws in their design I want to highlight two of them the first mistake made by them is that the key storage is decentralized however the key access layer Still Remains centralized so clearly they are still facing the same risk that centralized custodian faces and the second mistake made by some of the solution is that they try to implement a decentralized custodium with dedicated blockchain however in their design users assets are fully casted by the blockchain so when the blockchain is under attack or stops up operation then users asset might come at the risk of complete loss we believe that it is Paramount to have user in full control of their Pro of their digital asset even in extreme cases um or at least provide them the capability to restore the control of their private keys so given that we didn't find any satisfying Solutions on the market we ask ourselves this question if we set out to make the ideal custody solution what would it look like and our answer to this question is called kobochang it is a decentralized cut sodium with a dedicated blockchain but it is radically different from any of the existing Solutions uh Inc essentially it is a Community Driven shared custody infrastructure that has the potential to power the entire blockchain ecosystem so I'm gonna give you a high level uh introduction to Cobo chain but I don't have enough time to dive into the technical details so this is the high level architecture overview I will highlight four key features of cobal chain first is that it presents an open architecture that allows for easy integration with various kinds of blockchains and smart contract platforms protocols and applications to enable full stack solution and second it is blockchain agnostic so from user's point of view they can have a unified experience being accessing various kinds of Target blockchains and third day it is highly programmable it comes with a full-fledged smart contract platform and in addition to that it comes with the advanced business flow modeling and execution engine which makes it the first of this kind in the world and lastly but not least is that it is fully decentralized all the layers in the stack from Key storage to access control and even application entry point will be fully decentralized they will be owned and driven by community so that brings us to the end of this talk in conclusion we made four predictions on the future of digital asset custody it needs to be first full stack solution second provide unified user experience and third it needs to be highly programmable and last but not least it needs to be fully decentralized and Cobo chain is a very ambitious project that aims at tackling all these challenges in a complete solution and we have actually been working on this project for a little while and we hope to build a community around it and uh we are aiming at launching the uh first version mid next year so we invite interested investors and Community Builders and partners or developers to join us and let's build the digital asset custody of future together I'm Chang I'm co-founder and CTO of Kobo thank you