Crypto Self-Custody 101 & How to Secure Your Crypto
Why it’s important to choose a secure crypto wallet?
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How do I know how secure is my wallet?
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Are there any other risks I should take account for?
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Wrapping up: Crypto is a great wallet for you
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The Ongoing Debate About Crypto Security
Although cryptocurrency is still in the infancy of its adoption, the number of investors has boomed over recent years. With all this additional activity, you might think questions over storage and security might have died down—they haven’t.
Some people sit firmly in the camp of self-custody wallets, whereas others prefer a hot wallet or exchange storage. There’s no right or wrong answer, and it comes down to personal preference, but you’ll find a hugedifference in the level of security each wallet type provides.
In this article, you’ll learn everything you need to know about crypto self-custody, why you should choose it overother storage methods, and how you can keep your crypto most secure.
What Is a Self-Custody Wallet?
Crypto self-custody wallets are often recognized as one of the most robust ways of protecting your crypto. They can be installed as an app on your devices or an offline device, usually in the form of a USB drive, and they give you complete control and ownership of your cryptocurrency.
As with any cold wallet or hot wallet, your crypto is kept on the blockchain. Your wallet's job is to secure your private keys so no one can access your crypto.
If you’re using an exchange, such as Coinbase or Binance, they use custodial wallets. Essentially, this means the exchange retains control of your private keys and signs transactions for you. While this is convenient andfast-paced, it puts your crypto at risk.
Firstly, as you’re not in control of the private keys, you essentially don’t rightfully own the cryptocurrency. Additionally, your wallet is always online and active, making it more susceptible to hacks and loss.
However, with recent events, such as the FTX collapse, more people are deciding it’s time to switch to self-custody. Now, record numbers of investors are taking control of their private keys rather than placing their trust in a third party.
Essentially, these investors are becoming their own bankers. The transition to a crypto self-custody walletcan be tricky at first. While this transition has more hoops to jump through and technology to learn, the benefits definitely outweigh the effort.
The Benefits of Crypto Self Custody
The two major benefits of a self-custody wallet are security and control. As the popular saying goes, “Not your keys, not your crypto.”
When deciding to use a self-custody crypto wallet, you lose the worry of not retaining control of your crypto. Itdrastically reduces the risk of malicious actors getting into your wallet, and it completely prevents the collapse ofexploitation of an exchange stealing or losing your crypto.
Yes, you might feel a little more pressure when you’re in complete control, but it’s better to be reliant on yourself than a third party that might not be trustworthy.
The Risks of Crypto Self Custody
It’s not all sunshine and rainbows. You need to consider a few risks before making the switch to crypto self-custody.
As mentioned, a self-custody wallet gives you complete control. That means if something goes wrong, you’vegot to fix it. For example, if you break your USB drive, forget your wallet password, or lose your recovery phrase,then your crypto could be gone forever.
You can take steps that should help you negate the disaster of losing access to your crypto forever, but it doeshappen, and you need to do everything you can to ensure it doesn’t.
Self-Custody Wallet Features
When compared with a hot custodial wallet, you don’t lose any important functionality with self-custody. You’ll still be able to buy, swap, and sell crypto easily.
Many self-custody wallet options are out there, so the features you have access to will depend on the provider selected. However, most will also make it possible to transfer, send, and receive crypto as well as payor load up a crypto debit card.
Yes, it is a little more labor intensive and you’ll need to get to grips with the new technology, but it is definitely worth it.
How to Secure Your Crypto With a Self-Custody Wallet
First, you need to find the self-custody wallet you want to use. Then create a new wallet and keys for each cryptocurrency you hold.
At this point, you must make a note of all your private keys and recovery phrases! Remember, if you losethem, you’ll lose your crypto forever.
Next, you’ll need to transfer funds from your custodial wallet to your new self-custody wallet. This is easy and thesame as initiating any crypto transaction you’ve done before. Simply copy your new wallet address, head over toyour old wallet, and send the crypto over.
TOP TIP: Double-check the wallet address you’re sending crypto to. If you get it wrong, you could send your crypto to someone else!
In Summary
Self-custody wallets give investors complete control over their cryptocurrency. They reduce the risk of hacks and completely negate the potential of an FTX-style situation.
While certain risks still exist, such as losing your passwords, keys, or recovery phrases, you’ll certainly be in a better position if you opt for self-custody wallets.
For self-custody wallets that provide institutional-grade security to retail investors, check out Escrypto and take complete control of your crypto portfolio today.
