Wednesday, July 9, 2025
  • About us
  • Economic Calendar
  • Price Predictions
  • Coins Alerts
  • Crypto Portfolio Tracker
  • Exclusively from Our Partners
Cryptheory
  • Cryptocurrency List
  • Cryptocurrency
    • Cryptocurrency Exchanges
      • Top exchanges for trading Bitcoin derivatives
      • How to buy bitcoin without KYC
      • How to Trade Bitcoin – best platforms
      • Best platforms to buy Bitcoin by debit or credit card
      • Platforms for Grid Trading
      • BYDFi: Review and Guide
      • BingX: Review and Guide
      • Kraken: Review and Guide
      • Bybit: Review and Guide
      • Bitpanda: Review and Guide
      • Phemex: Review and Guide
      • Huobi: Quick Guide
      • Binance: Review and Guide
        • Binance Futures Guide
    • Bitcoin
    • Tether
    • XRP
    • Dogecoin
    • Avalanche
    • Stellar
    • The Open Network
  • crypto news
  • Crypto Exchanges Info
  • Analysis
  • Attractions
No Result
View All Result
  • Cryptocurrency List
  • Cryptocurrency
    • Cryptocurrency Exchanges
      • Top exchanges for trading Bitcoin derivatives
      • How to buy bitcoin without KYC
      • How to Trade Bitcoin – best platforms
      • Best platforms to buy Bitcoin by debit or credit card
      • Platforms for Grid Trading
      • BYDFi: Review and Guide
      • BingX: Review and Guide
      • Kraken: Review and Guide
      • Bybit: Review and Guide
      • Bitpanda: Review and Guide
      • Phemex: Review and Guide
      • Huobi: Quick Guide
      • Binance: Review and Guide
        • Binance Futures Guide
    • Bitcoin
    • Tether
    • XRP
    • Dogecoin
    • Avalanche
    • Stellar
    • The Open Network
  • crypto news
  • Crypto Exchanges Info
  • Analysis
  • Attractions
No Result
View All Result
Cryptheory
No Result
View All Result

Counterfactual wallets: do you need a permit as a crypto custody business?

by Margharet Tess
January 31, 2022
in sponsored
Reading Time: 3 mins read

Crypto wallets are of central importance for users to participate in the crypto market. They are therefore also of crucial importance for providers of crypto services and often a central component of the business model operated. In the classic design – one private key per wallet – only those who have the associated private keys can access the crypto assets in the wallet. In business models that include wallet services, the private keys regularly remain with the provider, while the user can only interact with the provider using his login data in order to have the crypto assets in the wallet available to him.

The main risk for the provider in these cases is losing the private keys, since it is then no longer possible to dispose of the crypto assets held in the wallet. With classic crypto wallets, lost private keys can only be recovered using a so-called seed, which can also be lost. In the event of the loss of private keys and seed, the provider will generally be liable to its customer and will have to pay compensation.

These are counterfactual wallets

Counterfactual wallets are smart contracts executed on a blockchain. As such, they offer some advantages over classic cryptowallet software. In particular, the private keys required to trigger crypto transactions are not connected to the wallet as is usual with classic wallet software. Rather, it is possible to exchange lost or compromised private keys for counterfactual wallets. A further advantage lies in ensuring that only current versions can be used. The current version of a counterfactual wallet is retrieved from the underlying smart contract.

If the code of the smart contract is updated or expanded, all counterfactual wallets based on it will immediately receive an update, for example to close security gaps or expand the functions. The first possibility of restoring access to counterfactual wallets can work, for example, via a so-called social recovery feature. A group of other participants in the blockchain is automatically defined, which can change the private keys of the crypto wallet in question through majority cooperation at the request of the wallet owner. Such participants, also known as “guardians”, never have access to the private keys of the crypto wallet themselves, for which they can change the private keys, since they do not know each other and technically only fractions of the private keys of the counterfactual wallet are stored with them.

What about the permit requirement?

According to the wording of the law, the crypto custody business, which requires a license, includes the safekeeping, management and security of crypto assets or private cryptographic keys. Whether the management of counterfactual wallets can also be included in these three alternative offenses has not yet been discussed in BaFin’s previous publications on the crypto custody business. The decentralized design of counterfactual wallets could initially argue against a permit requirement for providers. However, this is supported by the fact that there are also private keys for counterfactual wallets, which must be kept, managed and secured against unauthorized access by third parties.

In crypto services with integrated wallet services, the provider always takes on this task for its customers. In the case of counterfactual wallets, there is also the task of setting guardians. If social recovery is required, the provider must request it and again properly store, manage, and secure the new private keys. The fact that counterfactual wallets are not executed centrally in the IT structure of a provider, but via a smart contract on a blockchain, is irrelevant with regard to the handling of the associated private keys. The crypto custody business will therefore in all probability be relevant in most cases of offering counterfactual wallet management to customers.

  • Author
  • Recent Posts
Margharet Tess
Margharet Tess
Editor, Developer at Cryptheory Labs
I have been active in the cryptocurrency world for over 6 years, during which I have written countless articles about this sector. What fascinates me most about cryptocurrencies is their technological aspect and the problems they aim to solve. In the past three years, I have ventured into app development and am currently working on a larger project called P2E Buzzer. Stay tuned for the surprise. 🙂 My previous experiences: Business2Community.com, TradingPlatforms.com
Margharet Tess
Latest posts by Margharet Tess (see all)
  • Bitcoin’s Ready to Blow… Upwards? - July 3, 2025
  • Ethereum’s $5K Dream: Breakout or Breakdown? - July 2, 2025
  • Ethereum’s Not Dead Yet: On-Chain Data Screams Rebound & Trading Tips - June 27, 2025
Tags: Custody
Previous Post

Chainlink analysis – bounce from the main support. Did the price find the bottom of the correction?

Next Post

31.01.[News of the day] Peter Brandt says it may be time to buy BTC and other articles

Related Posts

Cryptocurrencies 101: A beginner's guide to trading Bitcoin and other cryptocurrencies
Guides

Cryptocurrencies 101: A beginner’s guide to trading Bitcoin and other cryptocurrencies

May 14, 2025
BC.Game Is The Ultimate Crypto Casino
Gaming

BC.Game Is The Ultimate Crypto Casino

March 28, 2025
Roobet Goes To Mexico!
Gaming

Roobet Goes To Mexico!

April 7, 2025
South Korea Delay Crypto Tax: How is Crypto Tax Legislation Developing Around the World?
sponsored

South Korea Delay Crypto Tax: How is Crypto Tax Legislation Developing Around the World?

December 22, 2021
Longest BTC Vanity address now available as NFT
sponsored

Longest BTC Vanity address now available as NFT

December 9, 2021
Roobet Crypto Casino: Play Over 2,300+ Games
sponsored

Roobet Crypto Casino: Play Over 2,300+ Games

November 23, 2021
7 best ETFs to buy in 2021
sponsored

7 best ETFs to buy in 2021

July 7, 2021
Five Reasons Why Companies Should Switch to P2P Cloud Storage
sponsored

Five Reasons Why Companies Should Switch to P2P Cloud Storage

July 7, 2021
NFTs Are Everywhere: Here’s What to Know Right Now About the Digital Trend and Where It’s Headed Next
sponsored

NFTs Are Everywhere: Here’s What to Know Right Now About the Digital Trend and Where It’s Headed Next

July 7, 2021
Please login to join discussion
Track all markets on TradingView
Score: 0
Game Over

Popular

Altseason Is Coming: Time to Saddle Up, Degens

Altseason Is Coming: Time to Saddle Up, Degens

June 20, 2025
Altcoin Tsunami Loading: Bitcoin Dominance Teases the Final Altpocalypse (Again)

Altcoin Tsunami Loading: Bitcoin Dominance Teases the Final Altpocalypse (Again)

June 26, 2025
Ethereum’s Not Dead Yet: On-Chain Data Screams Rebound & Trading Tips

Ethereum’s Not Dead Yet: On-Chain Data Screams Rebound & Trading Tips

June 27, 2025
Staking: Is it Just a Fancy Ponzi Scheme? Let's Get Real.

Staking: Is it Just a Fancy Ponzi Scheme? Let’s Get Real.

June 11, 2025
Stablecoin Scrutiny: From Tether’s Launch to MiCA’s Dawn, Regulators Are Watching

Stablecoin Scrutiny: From Tether’s Launch to MiCA’s Dawn, Regulators Are Watching

June 12, 2025
Ethereum's $5K Dream: Breakout or Breakdown?

Ethereum’s $5K Dream: Breakout or Breakdown?

July 2, 2025
To Everyone Selling Their Crypto: Take a Breath, Quit Panicking, and Read This Like a Pro

To Everyone Selling Their Crypto: Take a Breath, Quit Panicking, and Read This Like a Pro

June 23, 2025
SOL's Big F***ing Breakout: Why Solana's About to Send You to the Moon

SOL’s Big F***ing Breakout: Why Solana’s About to Send You to the Moon

June 10, 2025
10 Brilliant Reasons I’m Still Holding My 2018 Altcoin Bag (And Totally Not Crying Inside)

10 Brilliant Reasons I’m Still Holding My 2018 Altcoin Bag (And Totally Not Crying Inside)

July 1, 2025
Bitcoin’s Ready to Blow… Upwards?

Bitcoin’s Ready to Blow… Upwards?

July 3, 2025

💥 What's Your Crypto Trading Spirit Animal?

1. Your reaction to a red 15% candle?

2. How do you read charts?

3. What’s your biggest trading sin?

4. Favorite indicator?

5. How do you set your stop-loss?

6. What's your ideal trading environment?

7. How do you handle losing trades?

8. What’s your position sizing like?

9. What's your backup plan if you get liquidated?

10. Your crypto endgame?

Crypto News

Bitcoin

Ethereum

Altcoins

Cryptocurrency

Platforms for Copy Trading

Platforms for Grid Trading

Glossary of trading and crypto terms

Crypto Portfolio Tracker

 

Cryptheory Labs Projects

Guest Post for Free

On our website, you can share your opinions and insights. This feature is reserved for non-promotional articles. We are already working on a system for donations and rewarding every author.

This website is here for those of you who want to be at the forefront of innovation and new technologies like Bitcoin. But first, we need to tackle the challenges and survive in the unforgiving world of crypto assets. THIS IS CRYPTHEORY!

Follow Us

  • Terms Of Use
  • Privacy Policy
  • About us
  • Contact us

© 2024 Cryptheory - F**k the forex, we want gains!

Shiba Inu loading
No Result
View All Result
  • Cryptocurrency List
  • Cryptocurrency
    • Cryptocurrency Exchanges
      • Top exchanges for trading Bitcoin derivatives
      • How to buy bitcoin without KYC
      • How to Trade Bitcoin – best platforms
      • Best platforms to buy Bitcoin by debit or credit card
      • Platforms for Grid Trading
      • BYDFi: Review and Guide
      • BingX: Review and Guide
      • Kraken: Review and Guide
      • Bybit: Review and Guide
      • Bitpanda: Review and Guide
      • Phemex: Review and Guide
      • Huobi: Quick Guide
      • Binance: Review and Guide
    • Bitcoin
    • Tether
    • XRP
    • Dogecoin
    • Avalanche
    • Stellar
    • The Open Network
  • crypto news
  • Crypto Exchanges Info
  • Analysis
  • Attractions

© 2024 Cryptheory - F**k the forex, we want gains!

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.