The Importance of Self-Custody Wallets

The cryptocurrency industry is frequently impacted by scandals related to centralized exchanges. By now, you have likely heard one of several horror stories about people losing their crypto and digital assets as a consequence of these custodial exchanges being hacked or running away with user funds. Fortunately, it is entirely possible to avoid these situations altogether by using a self-custody wallet to take control of your own digital holdings.

Here’s everything you need to know.

Why should you use a self-custody wallet?

When the world’s first cryptocurrency, Bitcoin, was first outlined in its original whitepaper, it was offered to the world as an alternative to the power structures that banks and financial intermediaries place on our lives. Yet massive centralized cryptocurrency exchanges have since arisen and frequently serve as the custodian of their clients’ funds in a role that is similar to that of a bank.

While centralized exchanges do offer a way to easily buy cryptocurrencies using a wide array of common payment methods and fiat currencies, leaving your assets on an exchange means allowing the exchange itself to become the custodian of your funds.

Many people point out that this is actually antithetical to the point of the crypto industry, and instead advise that you use a decentralized exchange or immediately transfer your crypto into a self-custodial wallet.

When you let an exchange have control over your crypto, it means having to trust a third-party to keep your holdings secure at all times. As centralized exchanges are frequently the victim of breaches and digital theft, allowing an exchange to be the custodian of your crypto can quickly turn out to be a bad idea. Worse still, if you end up being the victim of one of these breaches, there may be little recourse for you to regain any of the funds you lost.

That is why it is so important to use what is known as a self-custodial wallet. Self-custodial wallets allow you to completely manage your own funds in a way that is secure and free from having to place trust in any third-party entity. While it was once difficult to manage your own funds back in the early days of crypto, the good news is that it has since become extremely easy to store crypto on your own.

Which non-custodial wallet should I use?

At a core level, there are two types of self-custodial wallets that you could consider for your crypto storage needs. These two categories are soft wallets and hard wallets .

Self-custodial soft wallets

A self-custodial soft wallet is a software solution that will allow you to independently store your private key, which is what ultimately determines who has access to your crypto. This is simply a program that is run either on your computer or your web browser that will allow you to manage your own funds. With a self-custodial soft wallet, your private key will be shared with no one — not even the wallet creator.

There are a wide variety of self-custodial software wallets available for free on the market today. Some popular options include MetaMask , Electrum , and Exodus . Ultimately, it is important to do your own research in order to find the wallet that is right for you. You will want to make sure that it supports your desired digital assets and that the wallet’s creators do not have access to your private key. Always make sure to download or access your wallet from an official source, such as the project’s website.

Self-custodial hard wallets

A hard wallet is a physical device that stores your private key. Many of these types of wallets can be used as “cold wallets”, meaning they are never connected to a live internet connection.

When you have a hard wallet, only someone with physical access to your device will have access to your crypto holdings, provided you do not share your private key with anyone. This makes hardware wallets an incredibly secure way to store your crypto and digital holdings.

Two of the leading hardware wallets available today are Ledger and Trezor . Both of these devices are widely regarded for their security, while still being easy for the average consumer to use thanks to the extensive documentation provided on their websites. It is important to do your own research before purchasing one of these devices to ensure that they meet your specific needs and are able to store your preferred digital assets.

Unlocking even more potential with AVADO

As a massive proponent of the Web3 landscape and the values of the cryptocurrency movement, AVADO is an advocate of users taking control of their own funds in the crypto world. For people who want to take things a step further, we provide access to easy-to-use blockchain devices that allow you to operate your own node and independently earn passive income.

These devices work by enabling you to help cryptocurrencies stay decentralized by playing an important role in their governance. Here, major cryptocurrencies financially reward users in a process known as staking, allowing you to earn crypto independently. With an AVADO device, you can easily begin staking in just a few minutes — even if you are a newcomer to the Web3 space.

To find out more about how AVADO can help you enable your digital independence, visit our website today.