On February 10, Tesla and SpaceX CEO Elon Musk via Twitter called on people to avoid hosted services, whatever it takes.
Musk was favorably mentioned in a from the custodial cryptocurrency wallet service Freewallet.
The Tesla CEO then replied to their tweet with "your app sucks" and a bit later that "any crypto wallet that won’t give you your private keys should be avoided at all costs''. That wasn't the first time someone has critiqued centralized security solutions.
The "not your keys, not your coins" principle has always been popular in the cryptocurrency community. However, the popularity of that sentiment has not reduced the number of hosted solutions out there, nor does it seem to have diminished their popularity.
Crypto wallets that "won't give you your private keys'' are examples of hosted solutions — services that undertake the account security of client accounts, funds, and so on. These services are supposed to be able to provide top-notch security for servers, funds, and data, as well as failure-free connection. Hosted services are responsible for backups, as well. If a customer forgets their password or PIN, they will be able to recover access by contacting platform representatives.
Some people have enough resources to do all this work without professional help from third parties. For instance, they use crypto wallet apps that don't store users' private keys and keep these keys and backup codes on their own hoping that they won't lose them. Those who lose their keys, cannot access their funds or data.
Even IT professionals lose private keys to their crypto wallets at times. A recent study has shown that 20% of the entire BTC supply is out of circulation forever due to this very reason. It is one of the prime reasons why hosted solutions are on the market despite some people, including Musk, thinking they "suck". Some people trust paid professionals more than their own memory.
Hosted solutions are represented by multiple popular platforms around the globe. Some of them are constantly mentioned among industry leaders and do a great deal to boost development.
The company whose app was recently targeted by Musk on Twitter is Freewallet. Freewallet is a pretty well-established platform that offers services around the world.
Freewallet has been on the market since 2016. By 2021 the company reported 3 million registered users. Freewallet offers dedicated wallets for a number of currencies and a multi-currency wallet app supporting over 100 coins.
Binance is the cryptocurrency exchange with the largest trading volume in the world. Interestingly, the platform managed to come to such prominence in an extremely short timespan. The service is famed for its sophisticated charts allowing precise control over the trading process, its fast matching engine, low fees, hundreds of trading pairs, and customer-oriented approach.
In 2019, the Binance server was hacked which resulted in a theft of a notable sum of money in cryptocurrencies. However, exchange reps
immediately reacted by providing full compensation to users and this episode didn't affect the reputation of Binance or cryptocurrency's public image. Another popular hosted product by Binance is Binance Chain Wallet.
Gemini is a cryptocurrency exchange founded by Cameron and Tyler Winklevoss in 2014. The platform is sometimes called "the most legit" or "the most insured" exchange. The Gemini team worked closely with regulators to provide users with an exchange backed by the law — not the most mainstream move in the cryptocurrency industry. Although users don't have control over their private keys on Gemini, the accounts are insured by FDIC. More than that, the exchange is easy to use. It even grants an intuitive automatic trading feature for those who don't have enough time to dedicate themselves to trading.
US cryptocurrency exchange Kraken is another popular hosted service providing excellent service for many years. The platform was launched in 2013 and funds security was the main focus of the exchange's dev team. Some refer to Kraken as the safest crypto exchange and it is another platform that doesn't provide its users with their private keys.
Those are only a few successful cryptocurrency platforms that don't provide customers with their private keys. It is likely that not many wallets are hosted solutions but as for exchanges — many of them hold users' funds and keys in order to control the money flow, prevent thefts, and let users back up their accounts. Most of the world's trading volume in cryptocurrency comes from hosted exchange services.
If Elon Musk is serious when saying that the platforms mentioned in the article and similar ones should be avoided at all costs then, it is difficult to
imagine where he wants everyone to go. Diverse options on the market benefit the development of the industry and allow people to find the solutions that fit them the best.