Reliance is a term used to describe a cryptocurrency user’s level of trust in their storage method or exchange. When dealing with digital assets, it is important for users to be aware of the different levels of reliance they may have when storing their funds. Depending on the methods used, users can have full reliance, partial reliance or no reliance at all.
Full Reliance
Full reliance typically refers to relying on a third-party service provider such as an exchange or wallet provider for securely storing and managing funds. These services provide users with peace of mind that their funds are safe and secure while also providing other features such as easy access and convenience. The downside to this type of dependence is that there is always the potential risk that these providers could go out of business or become hacked resulting in loss of funds. As such, it’s important for users to do due diligence when choosing which provider they will entrust their money too.
Partial Reliance
Partial reliance describes using multiple services simultaneously in order to reduce risk associated with trusting one entity alone (such as an exchange). This can involve splitting up your holdings across different exchanges or wallets so if one goes offline you still maintain control over some portion of your holdings elsewhere – reducing total risk somewhat compared to having all your eggs in one basket so-to-speak! It’s important however not just rely on two similar entities like two exchanges since both could potentially suffer from the same issues e.g., being hacked together at once etc…so diversifying between types providers/wallet types would be more beneficial here instead (e.g., holding half on an Exchange A and half stored safely & securely through Cold Storage).
No Reliance
No reliance means taking matters into our own hands completely by utilizing self custody solutions where we store our private keys ourselves without ever giving them away (in contrast with Full & Partial Rely techniques above) – thus eliminating any need whatsoever to fully trust another party – no matter how ‘reputable’ they may appear! Of course this comes at the cost increased complexity but also provides us ultimate control over how our coins are managed plus significantly reduces potential risks associated with full/partial rely strategies described earlier!
