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Decentralized crypto custodian Entropy is working to democratize the way user funds are held by challenging some of the existing centralized crypto custodians like Coinbase.
On Wednesday, June 8, decentralized crypto custodian Entropy announced that it has raised $25 million in a seed round led by VC giant Andreessen Horowitz.
Some of the other VC players participating in the funding include Dragonfly Capital, Ethereal Ventures, Variant, Coinbase Ventures, Robot Ventures, Inflection, and the Komerabi Fund. The latest funding comes after Entropy’s pre-seed sale earlier this year in January 2022.
Entropy is building a decentralized crypto custodian platform that uses sophisticated cryptographic techniques while leveraging multi-party computation. Tux Pacific, a trans activist and a self-taught cryptographer is the founder of Entropy.
Before this, he worked at the cryptography network NuCypher where he learned advanced cryptographic techniques while living in Berlin, Germany.
Changing the Crypto Custodian Business Model
Pacific is keen on fundamentally changing as to how the crypto custodian business model works. Some popular crypto custodians like Fireblocks, Coinbase and Anchorage Digital hold digital assets on behalf of their customers. However, such systems are still centralized and function in a way similar to banks.
As these custodians control the users’ private keys, they’re still vulnerable to hacks. As a result, users don’t have the freedom to interact with their funds at their will. Speaking to TechCrunch, Tux Pacific said:
“We’ve heard a number of stories that were always like, we’ve used people like Coinbase, or we’ve used like all these other custody solutions. They call them up, and they’re like, hey – we need to move funds. And [the custodian responds], oh, sorry, we have to wait to get a person to do that”.
He also talks about a fund that was likely to lose several billion dollars in OTC transfer just because their representative in the crypto custodian firm was on a vacation.
Here’s How Crypto Custodian Entropy Works
Entropy’s decentralized crypto custodial solution will allow users to implement their own rules for interacting with their funds. It will do this by imposing some gated constraints.
To accomplish this, Entropy uses cryptographic techniques based on multi-party computation. This will give users the freedom to deposit and use digital assets across any blockchain at any given time. But speaking to TechCrunch, Entropy said that they currently don’t have a business model in place. The company, however, is confident in “building a great product before thinking through monetization”.
Entropy founder Tux Pacific also compares its solution with Google Authenticator. This means it handles the process of “signing” the user data cryptographically. Pacific said that, unlike other cryptographers, Entropy first worked on an ideal user experience for crypto users and then worked on building the protocol around it.