Security Is Key: How To Protect Your Crypto Wallet

At the heart of crypto custody is most certainly security. This is especially true when it comes to whales and institutions. Securing your crypto assets should be at the top of your list when it comes to the implementation of your crypto portfolio. Many crypto holders simply keep their assets on exchanges. This, however, is not the safest way to store your assets.

There is a saying in the crypto community: “Not your keys, not your crypto.” When holding coins on a custodial exchange or platform, you no longer hold your keys. Ownership of the private keys, which authorize transactions and signify ownership, now rests with the platform. A crypto wallet allows users to store, send, and receive cryptocurrency by managing private keys, which represent ownership of digital assets.

It is important to remember that wallets don’t actually hold currency, unlike a traditional wallet. They hold the private keys. Blockchain-based assets never leave the blockchain. What, in fact, occurs is that the power of control shifts regarding who holds the private keys. This is an important distinction to remember and keep in mind.

What Is The Difference Between Custodial And Non-Custodial Wallets?

The only true way to ensure you are in possession of your assets is to use a non-custodial wallet. A custodial wallet is similar to a centralized exchange in that a third party is securing your assets on your behalf. There are a number of mobile/hot wallets with a really solid reputation, as well as cold wallets. The highest degree of safety comes via a cold wallet.

A cold wallet is not connected to the internet and is therefore protected from unauthorized access or hacking. Cold wallets are available as hardware wallets, such as the Ledger Nano S Plus or the SafePal Wallet S1 Pro. There is also a mobile version of SafePal, which has a 4.4-star rating based on more than 7,700 reviews. Trezor is another really strong option for cold storage and hardware wallets.

Exceptions To The Rule: When Custodial Wallets Make Sense

There are obviously times when one is required to hold assets on an exchange or third-party platform. This usually occurs when one stakes assets or uses a DeFi protocol to earn income. The risk is offset, or legitimized, by the potential gains on offer. This is perhaps less risky than it was, especially back in 2022.

Trading is another scenario in which private keys must be sacrificed to realize gains. However, there are some alternative options that are far less risky. For instance, you could hold your assets in a non-custodial wallet and then use the built-in DEX for all your trading needs. Creativity often renders favorable outcomes! In this article, we are addressing the different ways you can take custody of your assets. Remember, you are not limited to a single solution; you can use multiple solutions for different reasons.

For The Not So Tech Savvy (Crypto Wallets Made Simple)

Investors with zero knowledge of crypto, matched by a lack of desire to learn, may still wish to invest in the asset class. Centralized services are therefore their only option, as they are not knowledgeable regarding self-custody, private keys, and hardware wallets. Certain banks in certain parts of the world are already providing crypto custody services for their clients. This trend will most likely increase over time.

Many crypto holders also use services such as Nexo for custody. This decision is largely due to being able to simultaneously earn interest on their holdings. Nexo is likely your safest option for lending and earning yield.

How Do You Choose The Right Crypto Wallet?

At the end of the day, each investor needs to assess their own objectives and goals. This will enhance and simplify the decision-making process of selecting the appropriate wallet. I personally utilize multiple wallet types; chances are you will too, especially if you are quite active in the crypto space.

There does not necessarily have to be a single wallet of choice; rather, there can be different wallets for specific objectives. A good place to start is a non-custodial hot wallet, which gives you control of your own private keys. Once you’re comfortable sending and receiving funds, you can revisit the idea of an appropriate hardware wallet.

What Are The Best Non-Custodial Hot Wallets?

Coinomi is an established, trusted wallet that meets the needs of most crypto enthusiasts. The SafePal mobile app, as well as Trust Wallet, is also a really great option. These wallets also enable users to “custom add” many tokens that are not necessarily enabled by default. SafePal is the most advanced of the three and has received a very favorable reception among crypto users and enthusiasts.

Remember that if you do not receive your private keys when creating a wallet, you are not using a non-custodial service. Private keys are usually in the form of a seed phrase, typically 12 to 24 words. These words need to be recorded accurately in order to back up your wallet on other devices. Simultaneously, if you lose your phone or device, these keys will be required in order to regain access to your wallet. It is important to note that your seed phrase should not be saved online or even as a screenshot. Write them down and secure them somewhere safe!