An Introduction to the Open Custody Protocol

When we started building in 2020, we decided to build infrastructure that would focus on the mission of securing and managing private keys. We saw the absence of tooling as the primary infrastructure deficiency in web3. In part, we were right, but - ironically - our first approach did not address the risks associated with single points of failure.

As the state of decentralised technology has evolved, alongside the proliferation of innovative key management solutions, our industry faces a critical turning point. Do we continue to build applications and protocols in siloes, or do we embrace the opportunity to strive for aggregation and interoperability?

Enter the Open Custody Protocol (OCP), our innovative solution designed for modular custody.

OCP introduces an innovative relayer mechanism that seamlessly connects applications to a modular permissionless custody protocol. OCP operates a protocol that acts akin to a mesh network, enabling an end-user to leverage a diverse set of key management protocols. We call this “Keychain Aggregation”. Building a protocol that solves for Keychain Aggregation not only simplifies the way developers can build, abstracting risk and complexity, but it also harmonizes and aggregates the economics associated with having multiple bilateral commercial relationships.

With OCP, we have a new custody primitive that embraces (1) modularity, in connecting key management solutions, and (2) decentralisation, in the way users can access key generation and transaction signing services. We are particularly excited to pioneer this, witnessing existing security and custody solutions struggle to adapt to the ongoing proliferation of chains. Additionally, with the impending tokenization of Real World Assets (RWAs) - potentially mobilizing over trillions of dollars into the blockchain ecosystem - the demand for versatile and modular solutions is clear and present.

One primitive, multiple service providers

The Open Custody Protocol paves the way for traditional web3 businesses to effortlessly integrate with a multitude of key management technologies such as MPC, dMultisig, HSMs, and trusted custodians. Equally, this opens a realm of possibilities for web3 businesses building new fintechs, blockchain projects, tokenization protocols, omni apps and even encryption services. Our total addressable market is every developer in every blockchain ecosystem.

On launch, we have Fordefi, a next-gen MPC platform, and Lit Protocol, a decentralised key management network available. We expect to add more innovative and complementary solutions over the coming months.

$OPEN

At the heart of OCP lies the $OPEN token, a critical component facilitating the economic transactions between builders, users, and custodial solutions. Through a seamless exchange of native gas tokens, stablecoins, and custodial fees, $OPEN ensures the transaction guarantees needed for the protocol’s economic model.

What’s different to most protocol token economics, is how OCP’s architecture democratizes participation in the economic incentives in the protocol. In most protocols the token holder must stake to a validator to earn a share in the economic incentives, but with $OPEN, any holder can contribute to and derive value from the ecosystem without the need for complex operations or large-scale validators. How? By simply participating in the underlying liquidity pools that power the Open Custody Protocol.

Here is a simple representation of how the protocol manages the token and economic flows:

This protocol architecture ensures the ability to power the economic incentives needed for operations between users, builders, and multiple custodial solutions, rewarding user participation and - importantly - introducing potential deflationary mechanisms for $OPEN.

We believe the Open Custody Protocol represents a new milestone in the future of blockchain security, enabling builders and institutions to access Keychain Aggregation, a new standard in modularity and decentralisation of custody.