A few days after the Taihutu family returned to Phuket in November.
Didi Taihutu
Confidence in the cryptocurrency sector is rapidly eroding as it faces a wave of bankruptcies and investigations into Sam Bankman-Fried and his botched exchange, the loss and misappropriation of billions of dollars in user deposits, FTX.
But Didi Taihoto, his wife, three daughters and Teddy, a Pomeranian puppy they adopted in Portugal last year, are more confident in their bets than ever. bitcoin They just change the way they are stored.
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After liquidating all of its assets and buying bitcoin in 2017, when it was trading at around $900, Taihuttus has kept its crypto assets hidden in three main places: centralized exchanges (CEX) like Bybit and Kraken, decentralized exchanges (DEXs) like Uniswap, and hardware wallets. In secret warehouses on four different continents. But as digital asset brokers, lenders and exchanges continue to fail — locking up customers’ funds in the process — a Dutch family of five is moving $1 million in cryptocurrency to decentralized exchanges, allowing users to keep their savings. symbols.
“For me, bitcoin is still about freedom, and a decentralized currency should be able to be used around the world without having to do KYC or any other regulatory work,” Taihutu told CNBC about KYC or KYC standards. required by many centralized platforms such as Coinbase. DEXs do not require users to add an ID or bank account to the platform, making them an ideal storage solution for Taihuttus.
The day the Taihuttu family in Lagos, Portugal adopted Pomeranian puppy Teddy.
Didi Taihutu
CNBC caught up with the 44-year-old patriarch days after the family moved from Lagos, Portugal, to Phuket, an island off Thailand’s west coast in the Andaman Sea. The family currently lives on 0.3 bitcoins a month – about $5,000 – and they are buying back the bitcoin they sold last year when the cryptocurrency sold for about $55,000. For Taihuttus, cryptocurrency bankruptcies and failed tokens simply show that “bitcoin is king” and “very different from all other projects”.
While Taihuttus has no sign of being tied to FTX, Celsius, Voyager Digital or any of the other recently defunct platforms, the wave of failures reminds them of the importance of ownership.
One phrase in cryptocurrency is “Not Your Keys, Not Your Coins,” which means that legal ownership of tokens is obtained by holding the corresponding private keys. DEXs like Uniswap and SushiSwap are peer-to-peer platforms where transactions take place directly between traders, completely eliminating middlemen. Banks and brokers. This means that users store their tokens without ever handing over their private keys.
DEXs remove central intermediaries from financial transactions such as the trading, storage and transfer of assets through pieces of programmable code known as smart contracts. These contracts are written on a public blockchain like Ethereum and are executed when certain conditions are met, eliminating the need for a central intermediary. Basically, with DEXs you trust code and with CEXs you trust people.
Taihuttu explained, “You can never send your bitcoins to an exchange. Your bitcoins stay in your personal wallet, which means you’ve kept your coins in full.” “You connect to the DEX and trade outside of your portfolio by making that connection.”
This aspect of ownership is crucial.
“If DEX crashes, it doesn’t matter because bitcoin is always in your wallet,” he added.
change the storage strategy
From the start, Taihuttu said he could tell something was “really impossible” with the FTX, even though it was one of the largest CEXs on the planet before it crashed in November.
“A lot of influencers paid a lot of money to promote this person,” Taihuttu said, adding that trusted crypto products and companies usually don’t rely too much on celebrity endorsements.
The Dutch father of three learned his lesson in 2017 when he lost four bitcoins in a hack of a centralized exchange known as Cryptopia.
“From that point on, I was always looking for alternatives,” he said.
The Taihoto family in the Netherlands.
Didi Taihutu
People who choose to store their cryptocurrency can store it “hot,” “cold,” or a combination of the two. A hot wallet is online and allows its owners relatively easy access to their coins so they can access and spend their cryptocurrencies. The trade-off for convenience is potential exposure to bad actors.
“Cold storage often refers to cryptocurrency that has had its private keys — the passwords that allow cryptocurrency to be moved out of a wallet — moved to wallets that aren’t stored on computers connected to the Internet, so hackers can’t get into the computer,” he said. Philip Gradwell, Chief Economist, on blockchain data company Chainalysis “and the theft of private keys.”
Thumb drive-sized devices like Trezor or Ledger provide a way to protect “cold” cryptotokens. The square is also being built A service and hardware wallet “to make Bitcoin storage more widespread”. The Taihuttu family has relied heavily on cold storage to protect their tokens for the past six years.
Currently, Taihuttus keeps 27% of its crypto holdings “hot” on centralized exchanges such as Bybit, the Didi platform is transparent and backed by real assets. Being one of the oldest exchanges, it also owns some tokens on Kraken. Diddy calls his cryptocurrency stock “venture capital” and uses it for day trading and risky bets.
The remaining 73% of Taihuttu’s total cryptocurrency portfolio is in cold storage. Cold hardware wallets scattered around the world contain Bitcoin. ether and some litecoin.
Didi Taihuto in the Dubai desert.
Didi Taihutu
The family declined to say how much cryptocurrency they held, but disclosed that they moved $1 million worth of bitcoin, ether, litecoin, polkadot and other tokens from these hardware wallets and centralized exchanges to decentralized exchanges.
Tainuttu says he wants to transfer 100% of his family’s crypto savings to DEXs and invest 15% of his net worth in emerging DEXs because he sees these decentralized platforms as the focus of the next bull run. When asked why he would participate in DEXs instead of maintaining his encryption, Didi pointed to the ease of access.
DEXs allow Didi to directly connect the cryptocurrency it holds in stashed locations around the world to the platform, meaning it can trade more easily while protecting its tokens.
“Now it’s really hard to use our capital to trade because then I’ll have to send my bitcoins from my ledger to the exchange,” Taihutu explained.
The financial privacy that DEXs provide is also a big incentive.
“You trade from an anonymous ledger on the exchange as an anonymous entity,” he said. “You get full access to non-KYC trading in a decentralized manner on the DEX.”
Taihuttu is not alone in its focus on DEXs. After FTX’s bankruptcy, Trezor’s sales revenue increased by 300% and billions of dollars fled from bitcoin exchanges. Meanwhile, cryptocurrency investment firm Multicoin Capital has told its limited partners that 7% of its assets are held in similarly cold, self-protecting multi-note wallets.
Didi Taihutu and her two daughters on a cruise in Portugal.
Didi Taihutu
Pros and cons of DEXs
Centralized exchanges are a big part of what helps cryptocurrency adoption by offering easy development to new investors.
He explained that “centralized exchanges play an important role in cryptocurrency adoption.” Austin Bunsen, co-founder of QuikNode, which provides developers and businesses with blockchain infrastructure. “With growth came industry growth.”
But in the last few years, and especially in the last six months, decentralized exchanges have grown in popularity as investors seek to trade in a way that protects their money.
Boaz Soprado, a London-based fintech data analyst, sees three main advantages of DEX: it’s unrestricted, meaning you don’t have to rely on someone (like Sam Bankman-Fried) to hold your money for you; They are open-minded, meaning anyone in the world can participate; Transaction data is more widely available, which reduces the risk of insiders taking advantage of the knowledge they only have.
Didi Taihutu, in Lagos, Portugal.
Didi Taihutu
According to a June 13 research note from Bank of America, Uniswap has facilitated more than $1 trillion in trading volume from nearly 100 million transactions since its launch in 2018. For about 51% of all trading volume on DEXs year-to-date.
According to Alkesh Shah, head of Web3, Crypto and Digital Assets at Bank of America, while DEXs play an important role in the digital asset ecosystem, there are many reasons why these decentralized platforms won’t overtake their centralized counterparts anytime soon.
“Centralized exchanges provide a window to invest in or trade digital assets with someone to talk to if something goes wrong — which will be critical to mainstream adoption after today’s early adoption,” Shah told CNBC.
Investors are likely to prefer exchanges that are more transparent about their transaction practices, Shah said, adding that regulated and transparent exchanges will be essential for mainstream adoption in the long run.
Bank of America said in a June note that it expects Uniswap in particular to face regulatory scrutiny. The bank said it also sees the possibility that the Securities and Exchange Commission will require it to register as a national exchange or trading broker.
Didi Taihoto and her eldest daughter Julie.
Didi Taihutu
“Uniswap will not be able to comply with regulatory requirements due to its inability to verify the identities of users, implement AML/KYC (Anti-Money Laundering/Know Your Customer) requirements, or provide the necessary disclosures for the thousands of tokens listed on its platform,” the research note continued.
Some centralized platforms are breaking up teams by offering DEX-style services, but it’s unclear what regulatory pushback they might eventually face.
Meanwhile, Soprado told CNBC that at this point most DEXs are losing money, meaning they may not be sustainable.
DEX is also an automated market maker, meaning the exchange collects liquidity from its users and then uses an algorithm to value assets within that pool. Soprado says this model has proven to be quite resilient – but not proven against order book exchanges like Coinbase.
Underneath it all, the Bitcoin family still believes the original cryptocurrency is a solid bet. They say they are not affected by the riots of the last six months.
“We seem to learn this lesson in every Bitcoin era,” Taihutu said. “It was Gox Mountain, banning bitcoins in China, banning mining. There is drama every time.”
He continued: “But if we look at the current situation: we have a big war, we have a big financial crisis, we have FTX, we have interest rates, we have a lot of bear market signals. I think bitcoin is really strong at $16,800. To me, Bitcoin is still working perfectly and still doing what it has always done: being a decentralized currency that everyone in the world can use.
Didi Taihutu speaks about Bitcoin adoption in Tulum, Mexico.
Didi Taihutu