Not Your Keys, Not Your Coins!
When it comes to investing in cryptocurrency, one of the most important things to think about is how you will store your coins or tokens. To store your crypto assets, you have the choice between a custodial wallet and a non-custodial wallet. In other words, you can choose to have third-party custody of your crypto, or you can self-custody your digital assets.
Read on to learn what self-custody is and why it’s so important for crypto investors.
What exactly is Self-Custody?
In crypto, self-custody refers to holding the private keys to your crypto assets rather than entrusting them to a third party. Crypto investors who self-custody their coins and tokens have complete control over their funds.
When you self-custody your digital assets, you are responsible for maintaining the security of your crypto wallet. That means taking extra measures to safeguard your private keys and being vigilant about not sharing your keys with anyone. While it may require more effort on your part, self-custody gives you peace of mind of knowing that only you have access to your funds.
In addition to enhanced security, self-custody allows you to retain full control over your crypto assets. When you take the opposite route and entrust your coins and tokens to a centralized exchange or a custodial wallet, you are essentially giving up control of your funds to someone else.
If the exchange or custodial wallet provider is hacked or goes out of business, there is little you can do to get your money back. However, if you self-custody your crypto, you can rest assured, knowing that no one can touch your funds without your permission.
Why Self-Custody Matters, Now More Than Ever
Centralized cryptocurrency exchanges have emerged as the go-to platform for buying and trading crypto. But as we see in recent events, online trading platforms are susceptible to cyberattacks, operational eros, and bankruptcies, which can lead to a loss of user funds.
The FTX bankruptcy scandal was a wake-up call for the cryptocurrency industry. It showed that even the biggest and most well-known exchanges are not immune.
This incident also underscores the importance of self-custody for cryptocurrency investors. By keeping crypto in personal, non-custodial wallets, like Trust Wallet, investors can avoid the risk of losing funds to fraud or theft.
Moreover, with self-custody, investors have complete control over their digital assets and can ensure that their funds are always available when they need them.
Self-Custody Essentials
When it comes to self-custody, there are two essential aspects. Firstly, you need to store your crypto assets in a non-custodial wallet, and secondly, you need to ensure that you have securely backed up your wallet.
Use a non-custodial wallet
A non-custodial wallet such as Trust Wallet is one where the user holds their private keys, while a custodial wallet is one where the private keys are held by a third party, such as an exchange. There are two main types of non-custodial wallets you can have: a hot wallet and a cold wallet.
Hot Wallets
Hot wallets (or software wallets) are crypto wallets that are connected to the internet. Most hot wallets are programs that you download and install on your computer or mobile device.
Arguably the most popular non-custodial hot wallet is Trust Wallet, which you can use both on your mobile device or desktop.
Don’t have Trust Wallet yet…?
These types of wallets are convenient because they allow you to access your funds from anywhere. Moreover, hot wallets usually have more features than hardware wallets, such as the ability to hold multiple crypto assets, access decentralized applications, and trade directly within the wallet in a decentralized manner. However, they are considered slightly less secure than hardware wallets because they are connected to the internet.
Cold Wallets
Cold wallets are offline crypto wallets that aren’t connected to the internet, which is why they are generally considered more secure.
However, cold wallets are less convenient because you can’t access your funds as easily. Moreover, they don’t offer easy access to dApps and typically don’t allow you to store a wide range of assets, such as NFTs.
The most popular cold storage option is a hardware wallet, which usually comes in the form of a USB stick-looking device. This device stores your private keys and only allows signed transactions to be sent from it.
The other type of cold storage is the paper wallet, which is simply a piece of paper with your public and private keys printed on it. Paper wallets are secure if they are stored properly (e.g., in a fireproof safe), but they are very inconvenient to use and susceptible to physical damage.
Back up your wallet securely
When you self-custody your crypto, you are responsible for keeping your private keys safe and secure. This means that you need to take measures to ensure that your keys are not lost or stolen. Therefore, you have to back up your wallet.
Creating a backup of your wallet is a simple process that can be done in just a few minutes. It typically only involves writing down a 12 or 24-word recovery phrase that you can use to regain access to your wallet in case your phone, computer, or hardware device is damaged.
It’s important to store your wallet recovery phrase in a secure location and never on your computer or in the cloud. Additionally, you should consider storing your physical backup in multiple locations so that if one is lost or damaged, you have alternatives that can be used to restore your wallet.
By taking the time to create a backup of your wallet, you can rest easy knowing your assets are secure.
How to Self-Custody Crypto with Trust Wallet
Trust Wallet is the leading non-custodial crypto wallet that enables you to securely store over 8 million digital currencies and tokens on your smartphone and desktop browser. It is available for both iOS and Android devices.
- To self-custody crypto using Trust Wallet, you will first need to download the app.
- Once you have installed the Trust Wallet app, open it and select the “Create New Wallet” option.
- You will then be shown your wallet recovery phrase that you need to write down and securely store somewhere safe.
- The last step is to select the coin or token you want to self-custody and send your crypto from the exchange or non-custodial wallet to your new Trust Wallet address.
- Now you can hold, receive, and send your cryptocurrency without relying on a third party.
Self-custody is an essential piece of the puzzle for crypto investors. Centralized exchanges have been proven to be prone to hacks and bankruptcies, which can lead to the loss of your funds. So to keep your crypto assets safe, make sure you self-custody!