The Keys to Self Custody in Crypto
This post was originally published on Zelcore
Self custody is on the rise. Thanks to the collapse and exposure of shady centralized exchange methods, high-profile hacks and security breaches, there’s been a sharp increase in awareness and understanding of the importance of private key management and asset control among cryptocurrency users.
Additionally, the increasing adoption of decentralized finance (Defi) and other web3 platforms, which rely on non-custodial wallets for accessing and managing assets, is also playing a role in the pursuit of self custody.
In this article, we briefly explain what self-custody wallets are, how they work, their advantages and how Zelcore helps crypto investors take complete control of their assets.
A self custody crypto wallet, also known as a non-custodial wallet, is a type of digital wallet that allows individuals to control their private keys and truly manage their digital assets. With a self custody wallet, the user holds the private keys that give them access to their blockchain assets and manages and secures them.
This is the polar opposite of custodial wallets, in which a third-party provider stores and, effectively, controls the private keys.
To use an analogy, a self custody crypto wallet is like a physical wallet where you store a slip of paper with a password to a safety deposit box. A custodial wallet is like telling the bank to store the password to your safety deposit box.
Unlike custodial wallets, which a third-party provider like an exchange controls, self-custody wallets eliminate the need for trust in a central authority or third party. Users who want to send or receive a cryptocurrency use their private key to initiate the transaction.
Self custody wallets aren’t one-size-fits-all. There are a few different types of non-custodial wallets, including:
- Hardware wallets, such as Trezor and Ledger, are physical devices that store the user’s private keys offline, providing a high level of security.
- Software wallets, such as Zelcore, are digital wallets that can be accessed through a computer or mobile device and can be used to store and manage multiple types of cryptocurrencies.
- Paper wallets are a cold storage solution that involves physically printing out a user’s private key or QR codes and storing it in a secure location.
Using a self custody wallet has some advantages over using an exchange or custodial wallet, including:
- Control of private keys: Self custody wallets allow the user to control their private keys, while custodial wallets control the private keys on behalf of the user.
- Ownership of assets: With self custody, the user is the sole owner of their assets and has complete control over them. With custodial wallets, the user does not have complete control over their assets and is at the mercy of the custodial wallet’s policies.
- Security: Self custody wallets are generally considered to be more secure as the user is in charge of their private keys and can take steps to secure them, such as activating d2FA and securing the hardware or device on which the wallet is kept. Custodial wallets, on the other hand, can be vulnerable to hacking and mismanagement.
- Privacy: Self custody wallets provide more privacy as the user does not have to share personal information with a third party.
- Autonomy: With self custody, the user maintains complete autonomy over their assets and can make their own decisions about managing and using them. Contrastingly, custodial users are at the mercy of the custodial wallet’s policies and procedures.
Despite these advantages, many crypto users continue using custodial platforms, presumably for their accessibility and perceived regulation. It could be argued that custodial wallets like exchanges provide easier (bank-like) accessibility, and must meet regulatory thresholds depending on the country the exchange operates in.
Nevertheless, these advantages do not overshadow the core benefit of non-custodial wallets, which gives users total ownership and control over their assets. The fact still remains that custodial wallets rob users of control, security, privacy and autonomy.
Zelcore is a self custody software crypto wallet. All the assets you store on the wallet are protected by keys that only you have access to, with the added security of d2FA.
Unlike a custodial wallet, like a crypto exchange, that sends and stores these details on a centralized server that can be hacked, the Zelcore wallet doesn’t keep your keys anywhere at all.
With Zelcore, users choose how they’d like to keep track of their username and password, whether it’s on your device, written on a piece of paper or engraved on a stainless steel keyholder kept in your safe. Each time you log out of the app, your login information is deleted and must be manually entered on your next login.
Not even Zelcore can access that information, as the platform doesn’t store keys on any server or database. This safety feature eliminates the possibility of a data breach and makes it impossible for anyone to access your account without your permission.
Zelcore never has custody over your assets, so we can’t take them with us if we go down or disappear. In such a case, users could still access their assets through any other wallet using their wallet address and password.
Switching to a self custody storage solution like Zelcore gives you total control over your crypto assets. Download the wallet today by visiting zelcore.io.