Forbes Interview Uncut: ChangeNOW’s Mike Ermolaev on Risks of Custodial Wallets
We publish the uncut version of the Forbes interview for ChangeNOW readers.
Mike talked about why non-custodial wallets have a valuable advantage over custodial services. A large crypto exchange Coinbase recently added a clause stating that in the event of bankruptcy, all users' assets would belong to the exchange – a crucial argument in favor of non-custodial wallets like NOW Wallet. Furthermore, he discussed other benefits of the wallet, including DeFi opportunities, and why it is an all-around effective and convenient tool for managing your crypto.
(Forbes) – I own about a dozen different cryptos but I keep them all on an exchange. I have a Ledger Nano. Never use it. Afraid I will lose it. The exchanges have their own custody service, which is good for those who have multiple coins. In that case, if you run an exchange or have your own wallet…what is the purpose of it. Why should just a regular investor have a wallet of the coins they invest in?
(Mike Ermolaev) – First and foremost, it is about ownership and risk. Most people use centralized exchanges because they look like banks to them. Due to the complexity and expense associated with storing cash, gold, and stocks, investors turn to banks or brokers for this service. Cryptocurrency is different – it doesn't have to be kept in a vault. It's more about who controls it. If you store your crypto on an exchange, it owns your private keys and thus your money. According to recent statistics, about $2.66 billion has been stolen from exchanges since 2012, with the most common attack method being the theft of private keys. In other words, crypto exchanges might not be the best choice for investors.
In response to the people's need for a bank-like experience, NOW Wallet was designed with a similar interface and features. Yet we offer one major difference: you fully own your assets as your private keys are in your hands. "Not your keys, not your coins" – a phrase commonly used among crypto enthusiasts.
Therefore, unless you are a day trader, it is best to keep your cryptos in NOW Wallet rather than on an exchange. ChangeNOW's integration with the wallet allows you to manage your portfolio directly within the app without having to go to an exchange.
As for hardware wallets, they are indeed a good idea, but there's always the risk of losing or breaking them. In addition, it is less convenient and slower to use than a mobile application. Furthermore, there are a lot of re-flashed and fake hardware wallets being sold by scammers for the purpose of stealing your cryptocurrency.
– Within your own wallets, is it mostly people who use the coin for transacting on the system, or are these just traders or long term holders who do not use your platform or service for anything other than as an alt investment? Any idea what your wallet owners are like?
– The non-custodial nature of NOW Wallet makes it difficult to answer that question precisely since it does not collect user data. Yet some of our users provide enough feedback so that we can get a sense of their behavior.
Some users purchase Bitcoin with the intention of making medium-term gains. Others diversify into cryptocurrencies out of fear of inflation. In some cases, people use our wallet for DeFi, NFT storage, and metaverse gaming. There are also freelancers, p2p traders, and other professionals who actively use crypto for work. As a whole, I'm proud to say that the NOW product ecosystem, including NOW Wallet, caters to every crypto-related need that may arise.
– Explain to a lay reader who is maybe one to two years into investing in crypto why they might want to consider holding their coins in your wallet instead of Coinbase.
– If you store funds in NOW Wallet, they belong exclusively to you. Just keep your private keys safe, and you'll never have to worry about anyone getting their hands on them. Theft isn't the only way your funds can disappear from a crypto exchange. You may also lose access to your funds if the exchange is shut down, freezes your assets, halts withdrawals, or ceases to exist. I believe Brian and his team have no malicious intentions toward your cryptocurrency, but accidents can happen to any company, regardless of how they promise users zero chances of bankruptcy. Speaking of Coinbase, well, if you are ready to lose your money in case of their possible bankruptcy, go ahead. For everybody else who is more concerned about the safety of their funds, ChangeNOW's NOW Wallet is just two clicks away. Whatever happens to ChangeNOW, your crypto will remain yours.
– You may have answered this already, but one reason I understand is staking. Or yield farming. If I am invested in a coin that pays yield and am keeping it on Coinbase, from what I understand, Coinbase takes a portion of that and gives me the rest. Is that true? I'm not even sure what they take in that regard, but I'm pretty sure they take a cut.
– That's a really good question, and the crypto community already knows the answer: it's DeFi. By connecting to any decentralized marketplace with NOW Wallet, you can trade, lend, invest in insurance programs, or stake cryptocurrency to earn passive income. This is all done while respecting the fundamental principles of cryptocurrency: privacy and property ownership. NOW Wallet is a key that unlocks many doors.
As for yield farming, it is the practice when exchanges use your coins as liquidity to enable others to trade and borrow cryptocurrencies, giving you rewards in return. Yet it comes with a high risk and is prone to extreme volatility and rug pulls by developers who may abandon a project and disappear with investors' money. Staking is a method for a blockchain to operate, giving users the chance to stake coins to be selected as a blockchain validator and receive rewards. Unlike yield farming, it is more stable and less risky.
– Any final thoughts or comments about wallet ownership – the purpose it serves, and why I might want to have your wallet if I own your token, instead of keeping your token on an exchange like Coinbase.
– ChangeNOW aims to provide convenient and reliable financial and life management tools. It may sound too ambitious to some, or boring to others, but that's what we do. Plus, we help people see how simple cryptocurrency is.
There is no point in comparing our products with those of well-known exchanges. Guys like Brian or CZ are advancing crypto adoption in a crucial way. From a user's perspective, I think a crypto exchange is only necessary if you are a day trader. Our intuitive tool allows you to access the world of crypto opportunities without an intermediary. Risks abound in today's world. Why add to them?
Besides enabling all kinds of operations with about 400 crypto assets, NOW Wallet offers a variety of features – users are able to exchange and buy crypto with fiat right in the app (choosing from more than 20,000 trading pairs), earn profits through staking, and connect to decentralized apps. All without sharing your personal data and with exclusive access to your funds. It also allows users to store, send, and receive every single token that exists on seven major blockchains. No other crypto wallet provides this service right now.
In regards to our token, it is less useful on an exchange than inside the NOW ecosystem. You can stake and receive passive income, get cashback from swaps within the wallet, or buy goods in our marketplace. Moreover, very soon we plan to introduce a tool that will be relevant to users who accept crypto payments or conduct p2p trading – for a symbolic payment in NOW Token, you will be able to check crypto addresses and transactions for illegal activity. In this way, you will avoid getting dirty crypto.
