Self-Custody Wallets 101

With cryptocurrencies continuing to gain mainstream acceptance, investors must prioritize securing their digital assets now more than ever. One way to do this is by using a self-custody wallet, which allows users to maintain control over their cryptocurrency holdings without relying on a centralized exchange or third-party custodian. In this article, we’ll provide a beginner’s guide to self-custody wallets, including an overview of different types of wallets.What are self-custody wallets and why are they important for securing your crypto?Self-custody wallets are digital wallets that allow users to manage their own private keys and store cryptocurrency holdings securely. It’s like having a safety deposit box that only you have the key to. You can store your most valuable items safely and securely and access them whenever you need to.The use of a self-custody wallet eliminates the risks associated with centralized exchanges and third-party custodians, such as hacking or theft. Self-custody wallets give users full control over their digital assets and enable them to access them at any time without relying on a third party.What are the types of self custody wallet?Self-custody wallets can be either hardware or software wallets. The hardware wallet provides an extra layer of security by storing your private keys offline. On the other hand, software wallets are digital wallets that can be accessed via a desktop or mobile device. Although they are convenient, they are generally considered less secure than hardware wallets. Changpeng Zhao, CEO of Binance, has stated that only 1% of people can ‘handle crypto self-custody right now’.You should carefully research and consider the pros and cons of each type of wallet before choosing one for storing your cryptocurrency.How to keep your self-custody wallet secure

  • Make sure you keep your private keys secure and don’t share them with anyone
  • Protect your wallet with a strong, unique password
  • Enable two-factor authentication for an extra layer of security
  • Regularly backup your wallet and store the backup in a secure location
  • Stay up-to-date with your software and firmware to stay protected

Self-custody wallets: what to do if they are compromised

As a precaution, it is recommended to disconnect self-custody wallets from the internet immediately if they have been compromised. This is important because a compromised wallet can be vulnerable to further attacks or exploitation. Disconnecting the wallet from the internet as soon as possible can help protect your funds from any malicious activity.The next step is to contact the wallet manufacturer and follow their instructions for securing your funds. For example, the wallet provider may suggest moving the funds to a new, secure wallet or performing a complete restoration of the original wallet.

In summary, securing your cryptocurrency holdings is crucial in today’s conditions. Self-custody wallets offer a way to maintain control over your digital assets and minimize the risks associated with centralized exchanges and third-party custodians.