Plugging more people into the global financial system requires developing new tools to fit their needs. From self-custody to staking, Proof of Reserves, and more, crypto brings new solutions to the table – adding on to the ones developed in traditional finance, like cash deposits and financial audits. At OKX, we don't think one world stands against the other. What we do think is that crypto extends what you can do with your money, giving you more power to decide:
- ✅ What to do with your money
- ✅ How to store it
- ✅ Who to trust it with
It's your money, so it should be your choice. And the best way to choose, is to know. So here's some material to help you choose what best fits your circumstances. What will be your next move?
- Decide what to do with your money
From depositing cash in a bank to staking tokens on an exchange, there are many different things you can do when you move funds to a financial institution.
As a refresher, here's our quick explainer of what really happens when you deposit money in a bank, and what are the options you get when doing so on an exchange:
💸 From banks to exchanges: What happens with your money 💸
Deposits come with what's called 'counterparty risk' – it's to avoid that risk that Bitcoin was created in the first place! But do you really know what's counterparty risk? Here's our quick explainer, with some (scary!) historical examples:
We might be a bit old-fashioned, but we think the number one task of a custodian, whether it's a bank or a crypto exchange, is to... store customers' assets safely? Doing that in the context of crypto presents specific challenges, so here's our presentation of the advanced security measures OKX applies in order to secure customers' funds. TL;DR: there's a reason we've never been hacked:)
⛨ OKX's wallet security ⛨
- Decide how to store your money
Traditional currencies allow you to keep cash under your mattress, of course, but that's not super convenient – and hard to travel with! One of the big innovations crypto brings is to let people store their digital money themselves, without trusting any one bank or exchange with it.
If you're not sure what self-custody is, here's a quick reminder about what self-custody is and how it works:
Self-custody is so core to the crypto culture it even has it's own day, called 'Proof of Keys' day. At OKX we celebrate it every year! Here's what's Proof of Keys and what it means:
Keys, keys, keys.... When hearing about crypto in general and self-custody in particular, you'll keep hearing about keys. So here's what you need to know about public and private keys:
But crypto doesn't just allow you to store spare digital cash here and there. It can also be made available for large, sophisticated investors. And we're actively working on it, in order to offer our institutional clients even more custody solutions:
Now, for all its merits, self-custody comes with tradeoffs and isn't a one-size-fits-all solution. Here are the tradeoffs it implies – it's important to keep them in mind when thinking about how to store your crypto!
- Decide who to trust
Whether you want to let your money sit with a custodian or have them put it to work, you have to trust them with your money. On this front, banks and exchanges work differently. Banks typically offer audits of their financial statements while healthy exchanges provide so-called Proof of Reserves.
But first, note that there are different kinds of Proof of Reserves (PoR), varying in frequency and quality:
🔍 Different types of Proofs of Reserves? 🔍
These differences apply for the sort of PoR exchanges do but one of the benefits of crypto is that you can also do PoRs for assets, like stablecoins and wrapped tokens! Here's what the difference is between the two:
But there's more! You'll usually hear PoR relies on "Merkle Trees" - but can you really explain what that means, in simple terms? Here's us giving it our best shot:
Merkle Trees are great but they don't fully hide the forest of metadata that comes with them. So industry experts agree the future of PoR is to enhance them with what's called "Zero Knowledge Proofs" (ZKP). Do you, also, have zero knowledge about ZKP? We've got a nice and clear explainer for you to get up to speed:
Finally, you might be curious about OKX's recipe for PoR. Hint: A good piece of Merkle Trees with, soon, a whole lot of ZKP seasoning. Here's how it works now:
And how it'll evolve soon:
⚡️ OKX's ZKP-enhanced Proof of Reserves ⚡️
- Your next move
From deposits to staking, self-custody, and everything in between, crypto empowers you with more choice than ever - and the're lots to process in there. To navigate the freedom crypto offers, knowledge is key. So, this year, expect us to empower you, not just with more tools, but with more education. And then it'll be on you to make your next move. Game on?
NOTHING IN THIS ARTICLE IS A SOLICITATION TO BUY OR SELL DIGITAL ASSETS. OKX DOES NOT ENDORSE ANY PARTICULAR DIGITAL ASSET OR STRATEGY. DIGITAL ASSETS HOLDINGS INVOLVE A HIGH DEGREE OF RISK, CAN FLUCTUATE GREATLY ON ANY GIVEN DAY, AND MAY EVEN BECOME WORTHLESS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING OR HOLDING DIGITAL CURRENCIES IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. OKX DOES NOT PROVIDE LEGAL, TAX, INVESTMENT, OR OTHER ADVICE. PLEASE CONSULT YOUR LEGAL/TAX/INVESTMENT PROFESSIONAL FOR QUESTIONS ABOUT YOUR SPECIFIC CIRCUMSTANCES.