Cake DeFilatest release: 2.3.0 ( 18th November 2021 ) last analysed 25th October 2021 Custodial: The provider holds the keys
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Do your own research!
Try out searching for "lost bitcoins", "stole my money" or "scammers" together with the wallet's name, even if you think the wallet is generally trustworthy. For all the bigger wallets you will find accusations. Make sure you understand why they were made and if you are comfortable with the provider's reaction.
The Analysis ¶
(Analysis from Android review)
This DeFi (Decentralized Finance) app promises passive income from cryptocurrency holdings.
Earn on Bitcoin, Ethereum, DeFiChain and many other coins.
Interestingly, this app is managed by a regulated business entity.
Cake Pte Ltd. is a financial services provider registered and regulated in the global financial center Singapore. Your money feels home!
Cake Pte Ltd is currently applying for the Payment Services License in Singapore. We have been granted an exemption to continue operations, pending the approval of our license application.
The Monetary Authority of Singapore (MAS) requires us to provide this risk warning to you as a customer of a digital payment token (DPT) service provider.
In Section 7.5, the Terms further adds that the company is not liable for any fluctuation in the market value of the supported tokens in their custody.
In the article entitled “How are my assets protected”, it describes the custodial solution for Cake DeFi.
Cake DeFi Wallet
Cake DeFi currently utilises the BitGo Custody wallet solution for all Cake DeFi user wallets, as can be seen on Cake DeFi’s ‘Balances’ page.
Upon installation of the app on BlueStacks, a video how to is presented.
We then verified our account via email and sms. Once verification is complete, we are then asked to verify our identity. This includes the following information:
- Mobile number
- Legal name
- Date of birth
- Country of residence
- Residential address
- Country of citizenship
- National ID or passport
- Proof of address
We looked for our Bitcoin wallet and opportunities to Buy, Deposit and Withdraw are available. However, these functions are only accessible once you’ve verified your account.
The options to earn from passive income come from:
- Liquidity mining
It is apparent that despite expectations for a DeFi solution, the app is actually very much centralized, custodial and not verifiable.
As the provider of this product holds the keys, verifiability of the product is not relevant to the security of the funds!
As part of our Methodology, we ask:Is the product self-custodial? If not, we tag it Custodial!
A custodial service is a service where the funds are held by a third party like the provider. The custodial service can at any point steal all the funds of all the users at their discretion. Our investigations stop there.
Some services might claim their setup is super secure, that they don’t actually have access to the funds, or that the access is shared between multiple parties. For our evaluation of it being a wallet, these details are irrelevant. They might be a trustworthy Bitcoin bank and they might be a better fit for certain users than being your own bank but our investigation still stops there as we are only interested in wallets.
Products that claim to be non-custodial but feature custodial accounts without very clearly marking those as custodial are also considered “custodial” as a whole to avoid misguiding users that follow our assessment.
This verdict means that the provider might or might not publish source code and maybe it is even possible to reproduce the build from the source code but as it is custodial, the provider already has control over the funds, so it is not a wallet where you would be in exclusive control of your funds.
We have to acknowledge that a huge majority of Bitcoiners are currently using custodial Bitcoin banks. If you do, please:
- Do your own research if the provider is trust-worthy!
- Check if you know at least enough about them so you can sue them when you have to!
- Check if the provider is under a jurisdiction that will allow them to release your funds when you need them?
- Check if the provider is taking security measures proportional to the amount of funds secured? If they have a million users and don’t use cold storage, that hot wallet is a million times more valuable for hackers to attack. A million times more effort will be taken by hackers to infiltrate their security systems.
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