Anchorage co-founder and president, Diogo Monica, to get his take on how the rise of decentralized finance (DeFi) is impacting the crypto custodian sector.
Monica stated that the increasing complexity of DeFi “is beginning to expose the inadequacies of cold storage custody and manual human operations.”
Anchorage’s president emphasized the additional risks incurred through the array of on-chain actions necessitated by many DeFi protocols, stating, “We see in our support for MKR governance, executive voting, and polling that clients want and often need to participate in on-chain activities.”
“As new and emerging protocols increasingly require this kind of active use of private keys, some custodians are having to put more trust in untested smart contracts, which can put client assets at risk.”
Institutions demand DeFi exposure
Monica said that Anchorage had noted institutional demand for DeFi exposure, stating, “Our institutional clients want to invest in a range of digital assets, including new DeFi projects and stablecoins.”
“Anchorage’s mission is to increase institutional participation in the crypto space, and DeFi is where a lot of the most exciting innovations are happening right now,” he said.
Efficacy of distributed custody system bolstered by COVID-19
The Anchorage co-founder stated that the firm’s distributed processes have proved particularly useful in the context of the coronavirus pandemic.
“Anchorage does not rely on manual human operations or require access to physical vaults or safety deposit boxes, unlike custodians that use cold storage,” he stated, adding:
“This point of differentiation is especially critical during the current pandemic: our solution works as it should even though our workforce is completely distributed, whereas other solutions depend on people physically getting themselves to whatever secure location is storing private key materials.”
Anchorage supports forthcoming tokens
Anchorage recently announced support for Compound’s governance token (COMP), which comprises the fifth yet-to-be-released crypto asset supported by Anchorage, including TrustToken and Celo.
“Anchorage is always looking to support new cryptocurrencies in demand by our clients,” Monica stated.