Introduction to Cryptocurrency Security
Cryptocurrency has skyrocketed in popularity over the past ten years, becoming a multi-trillion-dollar market. However, this swift acceptance has brought to light a concerning issue: many users struggle to secure their investments effectively. Each year, significant amounts of cryptocurrency—running into the billions—are lost due to security breaches and fraud.
Current Challenges in Cryptocurrency Security
The recent bullish trend in the crypto market has unfortunately been accompanied by a surge in criminal activities related to digital currencies, a situation that has persisted into 2025. In the previous year alone, cybercriminals absconded with approximately $1.73 billion in cryptocurrency, primarily linked to compromised private keys, seed phrases, and breaches of exchange platforms. These aren’t isolated incidents; such security failures are frequent and are a major stumbling block to the broader acceptance of cryptocurrency.
To protect their assets, users must navigate the realm of self-custody solutions effectively, as many losses stem from stolen keys via phishing attacks, forgotten seed phrases, and issues with failing exchanges. At Tangem, we strive to tackle these issues by developing accessible technology that simplifies the process of self-custody, ensuring it remains secure and user-friendly.
Risks of Centralized Custody
The risks associated with centralized custody options have led to some of the most notable losses in the crypto sector. One of the most notorious incidents occurred in 2014 when the Mt. Gox exchange vanished with 850,000 Bitcoins, worth over $50 billion today. Similarly, FTX’s collapse in late 2022 paralyzed more than $8 billion in customer assets, revealing that even established exchanges can succumb to mismanagement and fraud.
According to reports from Chainalysis, 2022 experienced a staggering $3.8 billion theft from cryptocurrency platforms, with most losses originating from centralized exchanges and bridging services—a significant climb from 2021’s $3.3 billion. This pattern highlights that centralized infrastructures are still prime targets for cyberattacks.
Self-Custody Challenges
However, the challenge extends beyond mere exchange failures; a considerable number of losses occur when users attempt to self-custody without adequate tools or knowledge. In 2024 alone, hacks amounted to $2.3 billion, with a staggering 81% attributed to mismanaged private keys or compromised security.
Surveys conducted in 2024-2025 exhibit that a considerable number of crypto users remain unsure about the security of their assets, with 59% of those familiar with cryptocurrency and 40% of active users expressing a lack of confidence in its safety. Many reported losing access to their funds due to poor key management practices.
Weaknesses in Current Self-Custody Solutions
A crucial weak point in current self-custody solutions is the reliance on seed phrases, which are often overestimated in terms of security. A seed phrase, essentially a plaintext version of a private key, poses risks by being easily lost or stolen. Estimates suggest that such exposure contributes to a significant portion of the over $200 billion in crypto that has been permanently lost.
In 2024, Chainalysis reported that between 43% and 44% of all crypto thefts were due to compromises of private keys or seed phrases. Phishing attacks alone accounted for approximately $1.05 billion in crypto thefts, with an additional $855 million attributed to key theft. Moreover, 70% of the stolen funds resulted from infrastructure weaknesses directly linked to private key vulnerabilities.
The Shift Towards Self-Custody
The situation clearly reveals that the current self-custody models place an unrealistic burden on users to maintain high operational security. At Tangem, we’ve dedicated ourselves to finding alternative and stronger methods of securing crypto assets.
A noticeable trend is emerging in the U.S., where both regulators and cryptocurrency holders are leaning more toward self-custody strategies. With an emphasis on personal asset control, this shift mirrors changing regulatory perspectives. U.S. Securities and Exchange Commission Chairman Paul Atkins has identified self-custody as a fundamental right, highlighting its necessity in the digital age.
“The right to have self-custody of one’s private property is a foundational American value that should not disappear when one logs onto the internet,”
Atkins stated.
Market behavior is indicative of this desire for control. After FTX’s downfall, hardware wallet sales experienced a significant boost, with major providers reporting two- to three-fold increases in sales shortly thereafter. Tangem also observed increased demand, signaling a broader movement of users seeking to manage their assets directly. This trend is reinforced by Google Trends, where searches for terms like “self-custody wallet” soared following high-profile exchange failures.
Research and Adoption of Self-Custody
Research backs this sentiment, with a March 2025 survey by Coinbase indicating that 56% of U.S. crypto users are aware of self-custody options, marking a 22% increase in non-custodial wallet adoption since 2023. Additional findings from the University of Illinois reveal that self-custody wallets now account for over 35% of the total crypto supply, a notable rise from 25% in 2022. With ongoing regulatory scrutiny on custodial services, self-custody is not only emerging as a safer route but is becoming essential for financial autonomy.
Tangem’s Innovative Solutions
Tangem’s innovative approach offers a groundbreaking solution to address these vulnerabilities. We have developed a secure cold wallet that eliminates the need for seed phrases completely, thereby removing inherent risks. Our hardware wallets generate private keys within a certified EAL6+ chip—a standard known for its high security in the realms of smart cards and banking.
With our technology, the private key remains safeguarded at all times, avoiding exposure to loss or theft. Users have access to multiple devices (cards or rings) which contain the same private key, allowing seamless access to their wallets without the need to manage a written or digital seed phrase. This design offers distinct advantages: it greatly reduces seed phrase risks, offers an intuitive user experience, especially for those less technically inclined, and integrates effortlessly into daily life through familiar hardware formats. With tap-to-phone functionality, Tangem wallets are battery-free and resilient against water, dust, and damage.
Conclusion
As we prepare for the future, our innovations continue with Tangem Pay, allowing users to spend cryptocurrency at millions of merchants while retaining full control of their assets.
Ultimately, for crypto to reach widespread acceptance, security measures must harmonize strength with accessibility. Pervasive complexity has, historically, deterred users, which often drives them to rely on custodians for safety. It’s essential that we create a landscape where secure self-custody is both attainable and straightforward for everyone.
