Nigel's Eyes

20221011 It isn't what it looks like.

Cryptowallet provider Ledger said that some of its users had trouble "withdrawing" their assets. At least that's what some correspondents have called it.

But this isn't like when a hedge fund says "we're freezing withdrawal" or when there's a run on a bank (or a crypto exchange). It's more akin to a DDOS attack, albeit in all innocence.

Ledger is one of a number of companies that sell "cold wallets" which are, basically, USB drives on which your crypto is stored instead of being held by a "custodian." It's like the old days when you used to have physical share certificates but now all you get is an e-mail saying someone is holding a virtual record of it for you.

The cold wallet is cleverer than that - it's an app that records your holdings and that processes and syncs your transaction with the blockchain. Like an e-wallet on your phone, in fact, except that syncs with your bank, etc.

What it means is that if an exchange collapses, especially one with an integrated custodianship department, your Crypto isn't there to lose.

For sure, if you lose the token (that's what such devices were called before someone redefined the term) or drop it down the toilet you're going to be in trouble but there are fail-safes.

But poor Ledger has had to admit that its servers were overwhelmed by the number of people dragging whatever they could out of FTX and others where customers are spooked and onto cold wallets.

It says that it's a temporary situation that is being resolved with more capacity.

That sounds as if it went over its "burst" limit on a cloud services provider.

Some will have a panic attack and think that the money on their device has gone missing. No. Unlike some exchanges / custodians it's your key, your crypto and it's in your possession and control.

No need for panic at all: it's just as if an ATM ran out of money. Simply put the card back in your pocket and try again after a cup of tea.