Wallet Security

In this article

-What are Crypto Wallets?

-Categories of Crypto Wallets

-Custodial Wallet

-Non custodial Wallet

-Security Measures

What are Crypto Wallets?

Crypto wallets are software tools that allow users to securely handle and engage with their cryptocurrencies by storing both their public and private cryptographic keys.

Categories of Crypto Wallets

Crypto wallets can be categorized into 2

i) Custodial wallets

ii) Non-custodial

-CUSTODIAL WALLET

In custodial wallets, a third-party service has complete control of your private keys. Centralized exchanges (CEXes) exemplify custodial wallets; upon creating an account, they generate a wallet for you without disclosing the private keys. Examples include Binance, Coinbase, Bybit, KuCoin, etc.

Advantages

1. User-friendly interface

2. Convenient features like password recovery

3. Access to customer support for issue resolution

4. Crypto to fiat (P2P)

Disadvantages

1. Vulnerability to hacking, risking the loss of funds

2. Lack of decentralization, conflicting with the essence of cryptocurrencies

3. Dependence on the custodian's policies and availability

Advantage of non-custodial over custodial is that

non-custodial wallets gives you 𝘁𝗿𝘂𝗲 𝗼𝘄𝗻𝗲𝗿𝘀𝗵𝗶𝗽 of your funds, and your private keys are 100% owned by you.

-NON-CUSTODIAL WALLET

There are two main types of custodial wallets: hardware wallets and software wallets.

Hardware wallets are physical devices that generate and store private keys offline. Users connect them to the Internet when necessary, but they are less convenient for everyday transactions due to the need for physical connection.

Software wallets, in contrast, are mobile applications or browser extensions that generate and store private keys while being connected to the Internet continuously. They are generally free and highly convenient for regular use. Examples include Phantom, Solflare, Metamask, etc.

Advantages of Custodial wallets over non custodial

- They can be challenging for beginners to navigate.

- Unlike custodial wallets, there is typically no password recovery option.

Security Measures

For custodial wallets

• Safeguard your email account securely.

• Implement 2FA (2 Factor Authentication).

• Refrain from syncing 2FA with the cloud to prevent compromise in case of cloud account access.

• Avoid using SMS verification, as it can pose security risks.

• Refrain from using the same password across multiple accounts.

• Create complex passwords that are easy for you to remember.

• Exercise caution by avoiding logins on public computers and refraining from using just any public WiFi.

For Non- Custodial

• For large amounts, use a secure Hardware wallet.

• When creating a software wallet, write down seed phrases and private keys on paper for added

security.

• use a burner wallet

• Avoid connecting to public networks