Can Custodial Platformz Ever Match the Security of Bitcoin Self Custody?

[X-ray]

A fellow Bitcoiners once told me that his preference for custodial platforms is as a result of "it's easy access and convenience and even claimed that it had a stronger security measures." But most of what he said don't really add up if we take a look at the collapse of FTX in 2022.

Some people just don't really care enough about self custody until shit hits the fan and they can't access their money anymore. I've seen countless people who got their money frozen by the exchange and can't access it for few years until the value plummets.

Too much that kind of story floating around the twitter and other forums.

They will only care about self custody when they see the benefit in it which they haven't realized yet. The easy of access will become over complicated years long bureaucracy when the exchange collapses.

[ABCbits]

Why people prefer custodial wallet?

1. They can generate more coins by staking etc.

Bitcoin protocol doesn't have staking mechanics. So the custodial wallet/exchange do something else with the Bitcoin, such as lending it to other people that comes with loss risk.

2. It's cost efficient, they don't need to pay transaction fee, trading very is very cheap.

Although it could cost more if they need withdraw Bitcoin to certain address, since services earn profit by charging high withdraw fee.

[UchihaSarada]

Bitcoin protocol doesn't have staking mechanics. So the custodial wallet/exchange do something else with the Bitcoin, such as lending it to other people that comes with loss risk.

Fundamentally and technically, Bitcoin blockchain is a Proof of Work blockchain, hence staking on this blockchain is impossible.

When people want to stake and earn staking rewards, they will fall to shitcoins that are named as Wrapped Bitcoins while they are not bitcoins, but only tokens. They are even not altcoins with own blockchains like Ethereum or BNB or Dogecoin but only tokens that parasite on available blockchains.

So those Wrapped Bitcoin tokens have multiple risks like depeg, effects from security issues of blockchains like ERC20, BRC20, TRC20 and so on. Altcoins with own blockchains are risky and tokens are more dangerous as they can die not only by their own project developments but also by uncontrolled problems from blockchains on which they were deployed.