By Andrey Lazutkin, CTO of Tangem

In the past decade, cryptocurrency has grown into a trillion-dollar asset class—but this rapid adoption has exposed a critical vulnerability: how users secure their assets. Despite the crypto industry’s promise of financial freedom through self-custody, billions of dollars are still lost each year due to security failures. The crypto bull run of 2024 sparked a sharp rise in crypto-related crimes — a trend that has persisted into 2025. Over the course of last year, cybercriminals made off with an estimated $1.73 billion in digital assets, with a significant share linked to compromised private keys, seed phrases, and exchange breaches. These are not rare exceptions; they are recurring failures that continue to erode trust and stall broader adoption.

Understanding and using self-custody solutions correctly is key to avoiding the most common causes of crypto loss: stolen keys through phishing or malware, misplaced or forgotten seed phrases, and funds trapped on failing exchanges. This is the problem we at Tangem aim to solve — to remove the barriers of adoption of crypto with the technology that makes self-custody both simple, accessible and secure.

Billions Lost: The Cost of Centralized Custody and Human Error

Centralized custody failures have repeatedly led to catastrophic losses for crypto holders. The most infamous example remains the collapse of Mt. Gox in 2014, when 850,000 Bitcoin disappeared—an amount worth over $50 billion at today’s prices. The bankruptcy of FTX in late 2022 froze more than $8 billion in customer funds, illustrating that even well-known institutions are not immune to mismanagement or fraud.

According to Chainalysis, 2022 saw a record-breaking $3.8 billion stolen from cryptocurrency platforms, with most of these funds siphoned from centralized services like exchanges and bridges. This figure represents a significant increase from the $3.3 billion stolen in 2021, underscoring that centralized points of failure remain the primary target for attackers.

But the problem extends far beyond exchange failures. A large share of crypto losses happens when users try to self-custody—without the right tools or understanding. In 2024, crypto hacks totaled $2.3 billion, with 81% linked to compromised private keys or failed key management. A 2024–25 consumer survey found that 59% of people familiar with crypto and 40% of actual crypto owners lack confidence in its security security.org —many of whom report losing access to funds due to key mishandling.

The Seed Phrase Is an Illusionary Self-Custody: Crypto’s Weakest Link

For many hardware wallets and self-custody solutions, the seed phrase is the foundation of recovery. The idea is simple: if a device is lost or destroyed, the seed phrase can regenerate the wallet. But in practice, the seed phrase introduces significant risk.

A seed phrase is essentially the private key written down in plain text. The very act of recording or storing it creates a potential vulnerability. If that phrase is lost or stolen, the assets can be accessed and drained without recourse. According to estimates from blockchain forensics firms, seed phrase exposure or mismanagement accounts for a large share of the $200 billion+ in permanently lost crypto.

Even users who take precautions often face challenges. Seed phrases stored on paper can be destroyed in fires or floods. Those kept digitally can be exposed through hacking or malware. And memorization—while ideal in theory—is impractical for most people, especially when managing multiple wallets or complex passphrases.

Private key/seed phrase compromises accounted for 43–44% of all crypto theft in 2024, according to Chainalysis and threat analysts. In 2024, phishing attacks alone resulted in $1.05 billion in losses—44.5% of total on-chain thefts—while private key theft added $855 million. In 2024, 70% of stolen funds in hacks and exploits were due to infrastructure attacks (i.e., private key/seed compromises).

The reality is clear: seed phrase-based recovery systems rely on users to achieve a level of operational security that is often unrealistic. This is where Tangem has focused its innovation.

Market Trends: Rising Demand for Self-Custody

The U.S. is witnessing a growing shift toward self-custody as both regulators and crypto users emphasize the importance of personal control over digital assets. This trend reflects not only market behavior but also evolving regulatory attitudes. U.S. Securities and Exchange Commission Chairman Paul Atkins recently underscored this principle, describing self-custody as a core American value.

“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. “I am in favor of affording greater flexibility to market participants to self-custody crypto assets, especially where intermediation imposes unnecessary transaction costs or restricts the ability to engage in staking and other on-chain activities.”

Market behavior strongly indicates a shift toward self-custody solutions. After the collapse of FTX in November 2022, sales of hardware wallets surged globally. The major hardware wallet providers reported two- to three-fold increases in sales in the months following the event. Tangem similarly saw heightened demand, reflecting a broad trend: users increasingly prefer direct control of their assets.

This shift is supported by search data as well. Google Trends shows that searches for terms like “self-custody wallet” and “hardware crypto wallet” spiked following each major exchange failure or hack.

Surveys further illustrate the changing sentiment. In March 2025 Coinbase survey found that 56% of U.S. crypto users are aware of self-custody solutions, and since 2023, there’s been a 22% increase in non-custodial wallet usage. Complementing this, researchers from the University of Illinois report that self-custody wallets now hold over 35% of total crypto supply, compared to 25% in 2022.

This growing preference aligns with regulatory developments as well. As governments around the world consider stricter regulations for custodial services, self-custody wallets are becoming not only a safer option but, in some cases, the only viable path to maintaining financial sovereignty.

Alternative Approach: Seedless, Hardware-Based Self-Custody

At Tangem, we believe crypto security should be both strong and simple. That’s why we designed a cold wallet that eliminates the need for a seed phrase altogether. No seed phrases, no hidden risks — just straightforward, reliable self-custody.

Tangem’s core mission is to drive self-custody to the masses by providing a simple and secure cold wallet solution. Our hardware wallets generate private keys securely within a certified EAL6+ chip, which meets one of the highest security standards in the smart card and banking industries.

In Tangem’s design, the private key remains protected at all times and never get exposed. This means there is no seed phrase to steal, lose, or mishandle. Instead, Tangem provides 3 alternative devices (cards or ring) that hold the same private key and are paired to the same wallet. These cards act as access devices, allowing users to access the wallet without relying on a written or digital seed.

This approach provides multiple advantages. Firstly, it eliminates seed phrase vulnerabilities: there is no need to store sensitive data that can be lost or exposed. Secondly, it provides easy and simple onboarding and user experience for the customer: recovery is handled by using a backup card, making it intuitive even for non-technical users. The smart seedless backup solution at Tangem has developed ensures the true self-custody and total ownership of your assets by the product design itself: the user cannot share his private key with about by product design. If you want to keep a secret, you must also hide it from yourself.

By relying on familiar, durable hardware formats — cards and rings — it integrates seamlessly into everyday life. Tangem wallets work with simple tap-to-phone interactions, require no battery, and are resistant to water, dust, and physical damage.

Looking ahead, we’re continuing to innovate. Tangem Pay will soon let users spend crypto at millions of merchants through a Visa card, while keeping full control of their assets.

Conclusion: Enabling Adoption Through Self-Custody and Security

For crypto to achieve mainstream adoption, security solutions must balance robustness with ease of use. Security solutions must be accessible to everyone. Complexity has long been a barrier: if managing a cold wallet feels like navigating a minefield, most users will choose the path of least resistance — typically, trusting a custodian.

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