Panel | Self custody is too hard for newbs. What needs to change? | Common S3nse - 2026

like to invite our next panel. I would like to invite the wallet panel moderated by Joel Valenuela. Thank you so much.

Hello everyone. Happy first day of common sense. Uh sorry for tiring out some people like myself included with Dashcon yesterday, but I'll I will get the energy going and make sure to make sure it's a good time. All right, mic check. Everyone's mic's working.

Check. Check.

Yes. Nice. Well, um let's just start with a round of introductions starting from whoever has the microphone. Uh say who are you

and what do you do and then give your most controversial wallet related opinion. Let's start out swinging. Who wants to go first?

Go for it.

Hi guys. Uh Bian here from Cloaked. Uh Cloaked is a privacy focused wallet that tries to preserve the UX that all users today in crypto know and love. Um we've been working on it for around eight months live for about three and a half months. Um so excited to be talking here today.

starting out strong here with the hot takes. Um, wasn't expecting it. So, I I I think I think what I'm going to go for given that it's a self-custody talk. Um, I'm gonna take the side of embedded wallets and I know it's not very privacy focused, but um, you just have to look at some of the large wallets in the space today have started to prioritize embedded wallet flows in their registration. Uh, take MetaMask for example.

uh if you go on try to download the wallet today they show sign in with email right so there's a very telling flow right there where embedded embedded wallets are actually onboarding a lot of people so maybe uh not the audience that would agree with embedded wallets but I'll take that side for this panel okay thank you so hi I'm Olaf um I work on a project called helium um which is specifically meant to solve some of the onboarding issues. Um, and as a hot take here is that I argue that none of the embedded wallets are actually self-custodial. Um, unless you use something like pass keys with them and then they reintroduce a lot of the problems that they would try to solve with embedded wallets. So, it's kind of an interesting problem there. Yeah, [clears throat] I'm uh Samuel Westrich from uh I'm the CTO of Dash Core Group and my hot take is so the panel is on um if uh self-custody is too hard for noobs, I guess.

So my hot take is it is it is and maybe there are some people that just shouldn't self-custody. I heavily heavily heavily believe in self- custody but there are some people that just shouldn't. I'll talk about that probably later why.

Um hi my name is Bastion. I'm from SHIP. Uh we do provide hardware wallet solution based on smart cart and my hot take will be um being able to have self-custody devices, tools and hardware all around the world because I truly think that it's not complex to be completely self-custody and I also think that a lot of people um doesn't really understand uh why it's important and when they realize it we need to provide them with the tools uh to be able to do So next question is which part of self-custody are we failing users at today? And I I start with the assumption that we are just because most people don't use crypto and a lot of people who use crypto don't self custody. If we think that we should move towards that, we're not there yet.

It could be as simple as we haven't marketed it hard enough. It could be that there's some foundational problems with how we restructuring things. So, what's the biggest thing that's holding the noobs or regular people or even even not so regular but awesome people here from actually using crypto particularly in self- custody.

The the biggest challenge is that when you try to be fully self-custodian, you need to uh master the whole security chain. It's not only okay I have the the right wallet, I have the right software, um I I have my seat phrase, but it's it's a process. You need to generate it safely with a good entropy. Of course, we remember the call card incident. Uh which make a lot of noise regarding how to generate the seat phrase, but you you also need to to back up the seat phrase.

You need to use it properly. You need to use a software wallet. You need to use a right blockchain. So, it's not just a single part. It's a whole journey.

And people has to learn the whole thing about self study. And I think this is the biggest challenge.

Yeah. Yeah. That's true. That's true. But I also would like to say that a lot of people just don't want to learn.

No. No. Of course. Of course. Of course.

And you're right. Self study is not for everyone. It's a tool. If you want to use it, you need to master the whole chain.

Yeah. And the real question is what do we define as noobs here? Do we define the people that get hacked as noobs that are in crypto or do we define the noobs as people that are not in crypto that we're trying to bring into crypto? So, there's like there are noob levels here.

I'm going to be harsher than that and say even people in crypto, but people who aren't using it today, who aren't self- custodying or who have a wallet that they kind of might play around with, but they they don't use for anything serious.

Yeah. If I had to take 10 random people that I know in crypto outside of conferences or outside of anything uh like just in my regular life that have told me about crypto, I would say like three out of 10 self-custody. And I ask why? Because I I really always have believed in self- custody. And I would say that they just don't trust themselves.

That's the number one answer that I get. I don't want to be responsible for my own money. Are we ever going to solve that if they don't want it?

I don't know.

I I think it's a good point and I've heard two of the panelists now say like believe in self-custody and it that sort of points to the fact that there is an ideology at the core of this and when you try to strip back right like is this ideology um really important for everybody? Are we being somewhat dogmatic here or are we um actually trying to be pragmatic and getting a lot of users to actually use crypto? Right. I agree. I I kind of like would say I fall in the camp of [snorts] self-custody is great.

I self custody, but I'm also aware that there's um a trade-off, right? So, you don't want to self- custody everything. If I had to um just give a give a take on like where we're at now in the industry, I think that seed phrases, for example, are uh transitional UX. Like I I don't believe that we're going to get everybody using crypto with seed phrases. And just to add to that, we we need to stop thinking about let's get everyone self-custodying just for the sake of it.

Our systems that we build need to be have at least feature parity with existing financial systems and then extra, right? Um and that that might look like a smart accounts onchain, etc. um pass keys and could get into that but Olaf, have you got anything to say on that?

Uh yeah, well I do indeed think that um seat traces are transitional from the perspective of key management. Uh there will always be people that want to use it and it's sort of the purest form of self custody. Um but the goal is to abstract it away and I do believe that we can self-custody everyone. Uh this is I part of it is my presentation tomorrow on why I think that. Um but there is really a split now sort of you either do self- custody or you're basically legally classified as sort of your helper or financial institution and there is room in between.

Um and you see that with for example a privy which I would say are legally classified non-custodial but if you look at the technology side of things they actually are but they do prove one thing very well is that they do onboard 120 million people right so and they were not going they were sort of okay I log in I do next next next it takes away the feeling that you described like oh wait I need to do all of this responsibility now right I mean sort where it's I find it very interesting is sort of on the crypto space we expect a level of responsibility and key management that if we really did have that all of us like there would be a lot of societal problems that we would not have right so um yeah but I do believe like something like privy does showcase and especially in ballot wallets there's more than just privy of course but um showcase that there is a interest and it can solve some of the feelings of unsafety.

But there there there is still one problem. Um it's based on cryptography. So at some point you need even if you go the full abstra abstraction of the seat phrase at some point you have to back up something somewhere and we we also need to provide uh the tools the hardware or the stuff to to let people safely store the most precious thing. could be a pass key, could be the seed phrase, could be a hash, whatever you want. Uh and and of course the the UX has to be nearly perfect.

So the people can let's say um just don't know they are trying to back up something very important but they are doing that. So we need also to provide the the tooling the hardware tooling to let them uh do that easily. Now which part are we further away from meeting the consumer where they need the wallet security such as let multiffactor authentication those kinds of things prevent unauthorized access to your funds or the recovery process meaning the actually storing your private keys in case you lose access to your devices you don't lose everything. Which of those two is the harder problem to solve and that we're further away from solving, do you think? Uh, I'll I'll take that one.

Um, I I I w to um I'll answer your question, but I do want to go back to like who are we trying to serve and if it's um you know the the power users of crypto um they're actually willing to endure a lot of pain points and you could say today that we we've already served uh that cohort of people. If it's um the the majority under the curve who can't sacrifice uh UX or won't then um you know I think even introducing a recovery flow outside of forgot my password is [snorts] um a step too far. Uh so that's what I meant with my last comment about we need feature parity first or better. Um and then what what was the other point before that? Which of the two is it wallet security like preventing unauthorized access or is it the recovery process?

Yeah. And then on the wallet security part I think you know uh it comes down to of course the thing needs to be secure but it comes down to educa educating the user on like what actually is happening here. Um the fact that they control their money you know um we can't we can't reverse transactions. Um, and that's like that's a that's one of the biggest UX pain points, right? So,

yeah. And I I have some data points here as uh like a lot of people we in Dash Core, we have a uh a wallet, right? We have a a mobile wallet and uh we get people who contact us, I lost my wallet. I don't have my seed phrase. What do I do?

Do you have a backup? They don't even realize that our wallet is completely decentralized, right? they think that somehow they're going to be able to recover their money with like um passport or something like that even though they never put in any information. And um yeah, I would say though that uh it's there's like a gradient of users, you know, it's not and noobs is is such a hard term to like classify here, but there are there are a lot of people out there that can be taught um with and I I don't think it's a question of education though, but I think like we have been doing a lot of the right things in some wallets and some other wallets not so much. What was the and for what was the next one?

Wallet security or recovery? Which of those two pieces is harder?

Well, wallet. Yeah, I mean sa saving your wallet um for for many people is I mean they just don't do it. They take a they take a screenshot. In fact, here's a here's something that is quite actually interesting. So, back in 2018, I was actually building the Dash iOS wallet and I made it so if you screenshotted your um your passphrase, it would change.

Yeah. And it would give you a big message, your passphrase has changed. Uh this is not secure anymore. And we had so many people, and this was a big mistake on my part, big big mistake because we had so many people that that screenshotted and then didn't even read the message in big letters, in red letters, your passphrases changed. It is not okay to screenshot your your passphrase.

Yeah. So, we had like uh I don't know, we probably had like 15 people contact us since then, like, "Oh, uh yeah." So, we got rid of that. Now you can screenshot your your passphrase. And then screenshotting passphrase, we had people that had their iCloud account hacks and uh they lost uh money that way, right?

We had two there. So less but um yeah, just an interesting data point there. Yeah, but that that's interesting story because you can see that a lot of people even if they try to be fully compliant, self custody and so on, they still made such a mistake and even though if you try to prevent them to do to do that, they are trying to do that. So there there is no perfect solution. Um there are many useful uh solution on the market that allows you to to split your seed to to be able to have a friends that have a short or something like that.

But even though it's it's quite complex for the end user and maybe the the recovery uh solution is um the most important part because it will give a safety net to every user. If you mess up during your setup, not if you split your seed on the the cloud, of course, but if you mess with your setup, you can still recover your fund. And this is an important part um to answer your question.

Great. Then I'll take the last one on this because I happen to work on a protocol that does exactly that like to do exactly with the idea as well that if you can solve recovery I mean then the operational security can be much stronger making mistakes signing the wrong thing that's UX and that's software but really hard security wise if you can be sure you can get everything back then it becomes much easier to secure because you can have all of a sudden emperor seat phrases you can do like if your device if you lose your device and it's gone and you can recover it doesn't matter but you can really narrow down so that's also from the hardware perspective if you can recover in a way that is easy and convenient then the operational security can get hardened. This one might take a little bit more thought. Um, what are people successfully self-custodying today that's not crypto that we can learn from? So, think about whether it's government documents like their birth certificate, passport, things like that.

Whether it's their family jewels, whether it's momentos, whatever people hold on to that they don't tend to lose that they're the best at. What's one thing that we can that people do that we can kind of learn from and maybe model how we do crypto self recovery after that?

Yeah, I think I think uh if if you're going to answer this question, you you have to sort of define the two worlds that we're living in. So, you've got the world of atoms and the world of bits. So, you know, the world of atoms, you've got cash underneath the the bed. um you've got you know jewelry in your bedroom and you of course that's an entirely different threat model than uh secure data in the world of bits. So maybe you know person the world of Adams aside I'm thinking about the world of bits you have got people today who uh use password managers and um you know I I wouldn't want my password manager getting uh hacked you know it's a it's a sort of honeypot in that sense and um you know you you actually have to store the the the master secret so if you're using one password for example that's a that's a pretty um important piece of information to uh store in the world of atoms but you're taking it from the world of bits right so whether you're printing that off and storing it somewhere secure um but then again I actually don't have the data on how many people actually use password managers uh so maybe that's a power user situation there um I I am seeing uh more people starting to use pass keys and there's an interesting uh web offense standard that's gaining a little more traction which is um pass keys being able to generate encryption keys and this uh p it's called web authentf and um to me that's if you if you can carry encryption keys around with you in with in nice UX that's an example of uh uh self-custody being done well Um, and you know, I could talk at nauseium about pass keys.

I'm huge proponent of them. Um, so yeah, I'll I'll I'll take that side and say pass keys probably in the world of bits are a good example of uh of self custody today

if you can store them properly again. So I just want to jump on on on you because uh I will have a workshop later today on the Vitalik stage and I will present how to build uh Pasi vault and password manager on top of a ring or a smart card. So it's fully open source so you can join and build your own by yourself. Yeah, I think on the self-custody part um I think identity documents is something that people hold very dear and are sort of careful of while also being for very operational right so it's if we want to have crypto to be as a sort of payment mechanism we want people to use it uh I think the one thing people are most careful of and probably their phones people are very careful of but I'm not sure if you can classify everyone doing well on custody on that but um yeah that's what I want to bring in I think identity documents is something that a lot of people are very well aware of that need to be careful with without them directly carrying monetary value right yeah [clears throat] so thinking about like what people self-custody the most first thing that came to mind at least in my family is like family heirlooms and you know it's it's they're hidden in a closet somewhere probably. Don't please nobody rob me.

[laughter] But yeah, there are family heirlooms and you know things from your ancestors, right? So why do my family and I think a lot of other families like like they're very careful about keeping them safe, right? Um, but if you took the same people and you gave them um a hardware wallet, what would happen? Actually, I do think that they, you know, probably most would put it in the same spot right right now. You know, so to answer the question, maybe the same.

Now, is there a role for things like biometrics and self custody or things like somehow trying to merge them with your government documents? Like if you could use if you could present your ID or passport certificate together, you can recover your private keys somehow. Isn't is that a worthwhile path to investigate? I I was going to take this one um just quickly because I I I I just thought about uh a recent take by the the crypto Twitter sleuth Zack XPTt. Um and this might speak to some hardware uh wallets and it, you know, is a pretty controversial take and he was essentially saying that uh iPhones secure enclaves with biometrics are probably the best way to store your crypto today.

Um so the he was basically um the narrative that was emerging was buy a burner iPhone um store your crypto somehow through the the secure enclave on the iPhone and um you're you're kind of like set and that that would be for power users, right? So when you said biometrics that that came to mind and I'm I'm curious uh maybe it's digressing from your question slightly but I'm curious what maybe the panel also thinks of of that take because it's pretty pertinent and it is an emerging narrative there as well. Yeah, I I think he's sort of right because why that is interesting is because at least the secure element uh generates its own keys, right? And if you then on the secure element mediate access biometrically uh at least the physical security is taken care of of the digital bits from its own perspective. But if you say something like let's do some distributed key generation and mediate access based on biometrics.

Now all of a sudden all of the power is in the system again. Right? So if you come from the perspective where you generate something and then you mediate access from biometrics or even a passport like whatever it is like your face scan something like this then it can work I think. But if we start conflating these things and let's say I'm going to make the example preview again. If privy says we do auto backup and we are going to check your biometrics.

Well, that's nothing to do with self-custody, right? Um, but of course, if your pass key that you use with privy is behind your fingerprint now, that's okay, right? But it's it's a very tricky thing because one gives power, the other one you gave it away.

So, if it's biometrics locally, sorry, to unlock something, it's great, but if you have to share your biometrics stuff with a server with some forc, it's just bad because you cannot change it. So if there is a leak with your uh finger information somewhere, so you are completely screwed because you cannot change your finger at all. It's not like a password. So I'm against biometric stuffs if it's a shared biometric information. I like it when it's to unlock locally something because it provide a very great UX.

In the Dash wallet, we allow um you know uh people to use their Face ID for payments. So, you know, we've had that for ever almost ever since Face ID was came out. And uh yeah, most of our users use it, some users don't. I believe we because we don't really get any information on that, but um yeah,

that makes sense. So now what is the single development in the self-custody space whether it's like current or very soon upcoming that you're most excited about that you're like oh that's that's going to be really good that's changing a lot of things and it can't other than awareness that people can get wrecked if they have poor entropy on the hardware part I'm very excited with the the tropic um secure element made by Satoshi lab because this is the first open-source secure element on the market and it will bring um on the table um a full open-source secure solution from the hardware and the software part because nowadays you you can only use um MCU which are not uh secure element or secure element that are uh locked by vendor not completely open source. So it will be very great for the entire industry when the the topic will be heavily used for security hardware solution.

I'll pass it on. I'm not very knowledgeable on this topic. [laughter]

Uh I I'll just take that and I can only speak from um how our users uh use cloaked. So um on our wallet we support pass keys and uh you can also connect your existing wallet. So those users are using seed phrases. The current split is about 75% pass key to um the rest being uh seed phrases. You know, I I like I said, I do love pass keys.

Um of course, the backup story is is complicated and a lot of people don't understand sometimes that that they're device bound. Um, so we we try to make that clear in the in the onboarding story, but uh like the the Pasi experience is is super nice. Uh I would I would love to see more wallets support them. Um and like I said earlier, the the web offend PRF standard uh is is super powerful because you can do more than just uh sign, right? You can you start to encrypt and uh do key derivation as well.

So it's interesting. Yes. And yeah, for me the most exciting part is the thing that I'm building with helium which is sort of on the recovery side. Yeah. I just I don't want to make the blur completely but it's like it is solving a lot of those missing pieces uh in a fully open source like walk away type way without introducing a middleman again.

um that can which was specifically designed over almost six years of R&D to do specifically solve only this problem right so I will be alterning a bit later and tomorrow I have a presentation about more of the problem that it's under underlying um but yeah that's why I'm here that's what I do

now do you think we can get to a world where everyone either fully self-custodies or is partially self custodies, meaning they have some sort of a multi-ync type setup with a vendor who can't steal their funds without them.

Well, I think uh I've been pretty obvious. I don't think so, but I think we need to target at least like, you know, 50 to 60% of the population. We're never going to get everybody, but if we can get more and more people. Yeah. Yeah, we can.

Uh yeah. One thing like with uh self custody, you get this really nice property for the companies offering the services to move much quicker because they don't have to comply with other sort of KYC and and all of these other um enforced regulatory burdens. So um I think to answer your question I and I agree with the panelist here like the everyone going self custody if it's doesn't make sense for their use case like no but um we might see because companies can move faster offering self- custody we might see new innovations quicker and better services and uh I that's the reason I want people to move to self custody um because we actually entice them. It's the the carrot on the stick so to speak.

I would say just yes it's the goal to me as much as possible where it makes sense of course when they don't hurt themselves. I I will add something here, right? Like I got into crypto to be my own bank and I like really wasn't evil evangelical about this, but yeah, it's not for everybody. Yeah, that's it.

Yes, I I agree. So it's especially a use case problem if you need it, if you want it for your company because it's easier to move forward if you are a user that take care about your privacy and want to be your own bank. You need to be self-custody. But of course, many other people will enjoy crypto, will enjoy um blockchain services without being self-custody. And it's therefore not a problem.

But we still need to keep building on top of self custody solution and improve the UX and improve the security and improve the backup process to give the people um the tooling for their own uh privacy.

Yeah, I just want to add one more thing. We should always push for more self-custody. You know, we really should push people in that direction. Are we going to get there? We'll never get there.

But we should always try our hardest.

Perfect. Well, lots of insights here. Thanks, gentlemen, for your valuable contributions. [applause]

We have one question from the slider and then I'll I'll I'll scoot. It feels like a lot of user behavior problems. Could it be solved by introducing financial literacy classes in school? What is your take on that?

That's true. That's true.

Yeah. I don't I don't think education works.

Okay.

Yeah. I would say like um are we going to start mandating other classes as well? Like um it's not a like is a choice of the school to to do that. But uh yeah, I'm not I'm not I think like this maybe is the the job of the the parents and and um family.

I completely agree.

Well, gentlemen, thank you very much. Thank you.

Thank you so much.