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DeFi

  • December 11, 2023
  • 4 min
  • What is a self-custody (non-custodial) wallet?

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    You likely have physical wallets for cash and digital wallets like PayPal or Venmo. But to truly own cryptocurrency and digital assets, you need a self-custody wallet.

    Also called non-custodial wallets, these give you sole control over digital money and assets. Self-custody wallets offer ultimate financial freedom and independence – your private keys and funds cannot be accessed by any company or bank. 

    For those seeking control over their digital wealth, self-custody wallets are essential. They allow you to fully use, grow, and manage digital assets without interference. If you want to unlock decentralized finance, you need autonomy. Non-custodial wallets put you in charge.

    Self-custody wallets work differently from everyday wallets.

    To participate in decentralized finance (DeFi) and access attractive yields, you need digital assets like USDC stablecoins. And you need a self-custody wallet for storing stablecoins.

    These wallets store private keys that securely control access to your blockchain-based assets. Each private key matches a public wallet address. This key pair enables transactions. The public key identifies your account to receive assets. The private key approves transfers out, like a password. Private keys must stay completely secure. Together, the keys confirm your ownership and sign transactions across DeFi activities – sending digital money, depositing digital dollars to Compound Liquidity Pools, and accessing services like borrowing, investing, and trading.

    The keys provide the access to DeFi and security, while giving you independence over your funds.

    What does the “self-custody” part mean?

    Self-custody signifies that only you have the possession of your digital money or other digital assets because you control the private key. You have the responsibility to safeguard access to your private key because it is not stored anywhere else. You have access to your funds 24x7x365 instead of relying on a financial intermediary. 

    Technical knowledge isn’t usually needed for a self-custody wallet.

    Using a self-custody wallet is straightforward – you don’t need vast technical knowledge. The interface is just like other similar investment & payment apps, only with even more security.

    You can check balances, view transactions, connect to DeFi to invest, send payments, and more. Many wallets like Wind even lets you purchase digital assets directly.  

    Wind App enables users to seamlessly deposit stablecoins into DeFi protocols to earn attractive yields. You can even link this to your bank account. So you can access DeFi benefits with the ease of a mainstream finance app.

    Self-custody wallets come in various types:

    Mobile Wallet:

    A convenient app on iOS or Android phones with the private key generated and stored on the device, offering backup options.

    Smart Contract Wallet:

    A program deployed on the Ethereum blockchain, featuring a mobile or desktop interface. It’s highly functional, with programmable features and advanced security measures; private keys are generated on the mobile device or browser.

    Hardware Wallet:

    Physical devices resembling thumb drives or credit cards for secure key storage and transaction approval. Connected to a computer with a desktop app, ensuring offline security.

    Desktop Wallet:

    Installed on laptops or desktop computers, desktop wallets are more complex than mobile versions, providing enhanced security. Private and public keys are generated on the desktop device.

    Paper Wallet:

    While not high-tech, paper wallets offer excellent security. They involve a physical paper copy with public and private keys, entered manually or scanned for transactions using web-based applications.

    How secure are self-custody wallets?

    Self-custody crypto wallets are as secure as your private key protection. Software, hardware, and basic security practices keep wallets safe. Never share private keys. If using a mobile wallet, keep phones locked and use a separate passcode for the app.

    Can the wallet provider access my funds?

    Self-custody wallet providers can’t access your funds. The private key, generated on your device, is exclusively yours. Even if the provider ceases support or shuts down, your funds remain secure with backup and recovery mechanisms.

    Are there non-self-custody wallets?

    Yes, those are also called hosted wallets. Hosted wallets, also known as custodial or hot wallets, control users’ private keys on servers, eliminating personal responsibility for key security and a third party holding keys to your wallet. 

    Some hosted wallets have extra security with Two-Factor Authentication (2FA), requiring a code or device confirmation. They also use multi-signature transactions, making approval from multiple parties necessary to enhance security.

    While some hosted wallets offer access to dApps for activities, they also come with their set of risks like vulnerabilities in smart contracts, susceptibility to phishing attacks, and the potential for human errors. Notable examples like Coinbase highlight their vulnerability to cyberattacks, by the $450 million loss in the 2014 Mt. Gox hack. Hosted wallets can’t give you access to DeFi today.

    Self-custody wallet Wind App

    Self-custody wallets are a must if you want to participate in DeFi.

    As a non-custodial wallet, Wind gives users sole control of private keys and crypto funds. Not even Wind can access assets – only owners can. But users must securely back up keys to prevent permanent loss. Wind partners with trusted exchanges to enable fast crypto purchasing and withdrawals using bank accounts/cards, after KYC checks. 

    Get started in minutes – download the Wind app on Google Play Store or App Store or sign up online with just your email. Set a secure PIN, create a username, and enjoy full access to web3 and decentralized finance. 


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