Prime Trust & the Risk of Bitcoin Custodians with Alex Leishman

 
 

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“The systemic risk that people don’t realize existed, is that one custodian could have an issue and take down dozens of companies – and that’s what just happened.”
— Alex Leishman

SHOW DESCRIPTION

Alex Leishman is a Founder, CEO, & CTO of River Financial. In this interview, we discuss the case of Prime Trust, a crypto infrastructure company, that’s been placed into receivership following key management errors that resulted in it losing customer funds. We talk about the challenges of asset custody in the Bitcoin industry and the benefits and complexities of building a regulated business.

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Key management is the Achilles' heel for most Bitcoiners. We all know the importance of having a diligent process for safeguarding seed phrases, and yet, many people have experienced material loss as a result of losing access to keys. Currently, around 4 million Bitcoin, over 20% of the available supply, are estimated to have been lost. The concerning thing is that this isn’t just a result of individuals making errors: there are businesses that are also culpable.

Prime Trust is a crypto services company that provided APIs and plug and play widgets for digital asset companies seeking backend infrastructure. A court in Nevada has just placed it in receivership citing operational instability and insolvency risks. The root issue is that Prime Trust accidentally lost access to wallets containing tens of millions of dollars in assets. Not your keys not your coins for the millionth time.

Custody is hard. But, it’s the same old basic lessons that underpin sound custody solutions. Avoid complexity. Have robust processes. Think about the long term rather than taking expeditious shortcuts. Target self-custody. However, these are lessons that are somewhat alien to the fiat ideology of “move fast and break things”. The community, therefore, needs to educate the new investor class that will be attracted to Bitcoin in the next bull market.

TIMESTAMPS

00:01:20: Introductions
00:03:47: What is/was Prime Trust?
00:09:07: What happened at Prime Trust?
00:15:01: How not to lose Bitcoin
00:21:58: With custody, simplicity works
00:31:43: Potential scenarios for Prime Trust
00:34:32: Pros/cons of building River Financial
00:46:30: River self-custody and auto-withdraw
00:50:08: Lightning and other Layer 2 protocols
00:55:39: Financial custodians
00:59:08: Final comments

 

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SHOW NOTES

PodcastPeter McCormack