A Guide to Custody of Your Assets
Self-custody allows you to have full control over your NFTs and your wallet’s private keys, which means you are solely responsible for the security of your assets. This can help protect you against potential hacks, scams, and other security threats.
Of course, this has a potential downside. Because you are solely responsible, there are no refunds or chargebacks if you make a mistake or get scammed. Whatever you lost is likely gone for good. In addition, Counterparty and Namecoin wallets and assets have their unique challenges, more on those below.
Security Best Practices
Emblem recommends that NFT owners secure their NFTs with a hardware wallet on their native blockchain whenever possible. This is easy enough for Ethereum-based NFTs but can get challenging for some Historical NFTs.
An example would be if you purchased a Rare Pepes Nakamoto card (RAREPEPE) in an Emblem Vault on Opensea. Should you unlock the Emblem Vault and hold the asset in a Counterparty wallet where you control the private keys? Or keep it in the Emblem Vault and store it in a hardware wallet?
The question can get a little complicated depending on each blockchain, so we will walk through each one to help you understand the uniqueness of each blockchain so you can make the best decision for yourself.
Counterparty & Dogeparty
You should consider these points when deciding to hold your Counterparty (Rare Pepes, Spells of Genesis, etc.) and Dogeparty assets on their native blockchains or within an Emblem Vault.
- Assets never expire, so you do not need to maintain the assets actively.
- In the case of Counterparty, be sure you download a wallet that you are certain can hold Counterparty assets. Standard Bitcoin wallets will NOT work, and you will lose your asset. https://freewallet.io/ is an option used by many.
- Counterparty wallets are secure and simple, but most do not work with hardware wallets (Ledger, Tezor, etc.), so there is no option to cold storage your assets. Counterparty wallets are essentially a “hot” wallet — similar to MetaMask — and by their nature, are less secure than a hardware wallet.
- Like Counterparty wallets, Dogeparty wallets are easy to use but can’t be connected to a hardware wallet.
NFTs on Namecoin, being some of the first in existence, have unique and often frustrating qualities that every collector should understand.
- Roughly every eight months (depending on the block numbers), the NFTs expire. This means that owners of the NFTs need to renew the assets or risk losing them.
- Namecoin’s Electrum wallet can be used by collectors to self custody their assets, but the technology is somewhat complicated and clunky for the average collector.
- Namecoin’s Electrum wallet private keys can be stored in a hardware wallet, but again, setting this up is technically challenging for the average collector.
- Renewing assets using the Electrum wallet is a slow process, as collectors can only renew a few assets simultaneously.
- Emblem Vault offers a solution to renew the Namecoin NFTs automatically if the Emblem Vault holds at least 0.6 NMC in the vault. However, it must be stressed that this solution is not foolproof, and collectors must still review each of their assets before renewal to ensure that the renewal took place successfully or alert the Emblem team should the renewal fail. Failure to do so before the renewal date may result in the loss of the asset.
What are the security risks when holding assets in an Emblem Vault?
One of the main benefits of storing your NFTs in Emblem Vaults is you can securely place them in standard hardware wallets. However, Emblem Vault has a few security risks that you should be aware of when using it to store and trade your NFTs.
- The unlocking service Emblem Vault provides for the vaults is currently centralized. We are working to decentralize it, but at present, in the unlikely scenario that the founders were to vanish, and the tech stopped working, existing vaults wouldn’t be crackable without the intervention of a trusted third party.
- Next, the key generation process, while partially decentralized, is still possibly vulnerable to hacks that could enable a would-be hacker to steal the assets of an Emblem Vault. This is similar to the risks of an exchange getting hacked. So while unlikely, the risks are not zero.
- Finally, scammers can create fake assets, or look-a-like tokens, and store them inside an Emblem Vault and sell them to unsuspecting collectors.
What is Emblem doing to mitigate the security risks?
For the unlocking service and key generation process, the Emblem team is exploring options to decentralize the service further and provide enhanced security for collectors. That said, a fully decentralized system may never be fully possible due to the nature of the technology.
The risks of scammers selling fake assets to collectors should be greatly reduced with the release of Emblem’s curated collections. The first test contracts were released in December 2022, and the official launch of the contracts for Rare Pepes is expected in January 2023.
We hope this helps answer some questions you may have about the best way to store your NFTs. Of course, we just touched on the most popular historical NFT chains here, so expect future information touching on other chains in the future.
Hit us up on Twitter if you have any questions or ideas for future how-to’s that you would like us to make!