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The power of self-custodial trading

· 5 min read

This is the first in a series of blogposts that explores self-custodial trading with 10101 - why and when self-custody really matters, and how it works.

Bitcoin is objectively the best ledger out there. But, as great as Bitcoin is at solving the problem of self-custodial ownership, when it comes to using your coins you depend on centralized platforms. On an exchange you deposit your funds giving up custody - you rely on the exchange to be honest and return your funds once you want to exit. What if there could be a financial system where nobody can lie of cheat?

With 10101 you never give up custody. The app empowers you to trade self-custodial, eliminating the need for a centralized custodian, and enabling autonomy. You stay in charge at all times: Your keys, your coins.

In the current beta version some features that are mentioned in this blogpost series might not be fully implemented yet. If you are a beta-program user and want to know what features to expect in the near future you will get a good idea what improvements will make it into the app soon 🙂

Did not sign up for the beta program yet?

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When do you care about self-custodial trading?

When you start using 10101, the self-custodial nature becomes immediately obvious because you have to back up your wallet seed. This is because 10101 is a Bitcoin on-chain and a Lightning wallet that enables you to trade. The wallet backup procedure resembles other Lightning wallets out there - the 10101 wallet backup flow is inspired by the great work of

Once you trade on 10101 the self-custodial nature might not be visible for some time. Self custody is a bit like security: Everybody needs it, but you might not see the need for it - until it matters. So, when does it matter? - When "shit goes down".

Imaging you traded on a central exchange - one morning you read that something has happened on your favourite exchange of choice. You try to log in. You can't. You can't access your funds anymore.

When an exchange goes bust you go through a lengthy legal procedures to get back your funds. Eventually you might get parts back through the legal system, but that can take years and you don’t have guarantees. The legal system does not favor the smaller players - take my personal funds from Mt.Gox hack as example: After nine years wait my payout has been pushed for another few months to October. Nine years waiting to get my funds back. That’s an insane amount of time! I learned my lesson…

It boils down to one simple question:

Do you want to rely on the legal system to maybe eventually get some funds back to you, or do you want to rely on an automated protocol that guarantees that you get your funds back in a specified timeframe?

With 10101, in a worst of all worst cases scenario, it takes a maximum of one week for your funds to arrive back in your wallet. And that’s a worst of all worst cases scenario - in all other scenarios it would arrive much faster.

You are in charge of hitting the "panic button" in case you have to get your funds out. Once a worst case scenario is detected and you hit the panic button the non-collaborative settlement protocol is executed and nobody can stop it - that's the beauty of a self-custodial solution. Ensuring that you get your funds back should and can be as simple as pressing one button. The key to adoption for self-custody is making complex protocols usable with one click.

The 10101 team believes that self-custody will only be adopted if the user experience is at least as good as on existing exchanges today. We are convinced that the 10101 experience can outperform the experience on centralized exchanges. Self-custodial trading allows overcoming signup friction while maintaining a higher level of self-sovereignty and security. You stay in control of your Bitcoin at all times - in a fast and easy to use app.

In our next blogpost we will start exploring the details of the self-custodial trading setup in 10101 and how it protects you.

The 10101 app is currently available to selected beta users on iOS Testflight. Android coming soon. Be one of the first to try the app! Join the revolution of self-custodial finance:

Happy stacking,
The 10101 team

P.S. At 10101 we don't stop at trading, but it is the first building block we are working on. This foundational work will enable other product - as you have probably seen in our tweets we are exploring solutions beyond trading, such as synthetic stable coins.