Today,we are going to talk about Is Your Crypto SAFE? Here’s How To Do Self-Custody The Right Way
Do you have crypto in hot storage or on an exchange? Well, if you do, then this post is for you because it is not so safe as you think it is. That’s because unless you hold the private keys to your crypto, its not really yours. In this post I’m going to tell you exactly why that is and give you some hints and tips to make sure your crypto is as safe as it can be.
Using centralized entities to hold your crypto is just a downright bad idea and now at FTX, billions of dollars of client funds have been lost. There is only one way you can know for certain that your coins are under your control, and that is to take personal custody of them.
Understanding Self-Custody
Self-custody is when you hold the private keys to your cryptocurrency wallet, which is to say you are the only person with the ability to sign transactions from that wallet, thereby being the only person who effectively controls your crypto. Having self-custody of your cryptocurrency is the safest way to avoid a technical compromise or an account breach.
Conversely, when you place your funds on an exchange or any centralized platform for that matter, you’re doing so into a wallet that the platform has the private keys to; it’s a communal wallet, and you have to hope that no one will lend or send those funds to anyone else.
So what you’re left with from the exchange is an IOU, much as is the case with a traditional bank account where cash, or crypto in this case, exists as an entry in the database when you process a withdrawal. The exchange signs the transaction with its own keys, assuming the crypto is still there. The idea is to minimize your exposure to counterparties, no matter how trustworthy they may seem at first glance.
Types Of Wallets
The most important thing is to get your hands on a self-hosted wallet. Now there are literally hundreds of these and the wallet that you choose will depend on what you want to use it for as well as the coins and tokens that you want to store.
There are at least three options:
Browser Wallet
Mobile Wallet
Hardware Wallet
Browser Wallet
Mostly supports Ethereum and ERC20 tokens, so if you wanted to dabble with DeFi in another ecosystem, then you’ll need a different compatible browser wallet. For example, if you’re on Solana, then the Fantom wallet is perhaps the best in that space, but obviously it doesn’t have ERC20 support. If you wanted a wallet that had both, then you could consider the Coinbase wallet.
I’m not a fan of it personally because it’s only supported on Chrome, but many others have sung its praises. I should also note that all of these wallets that I’ve mentioned are extensions for existing browsers; we’re talking about integration with Brave and Opera, which both support Ethereum and Solana and also have integrated DEXs for quick swaps. although if you prefer to connect your favorite DEX elsewhere, then that is also possible.
Now when it comes to things to worry about with these wallets the concerns are to make sure that you’re downloading the official wallet from the Chrome or Firefox store. You want to make sure that you are downloading from the source directly and not from a mirror or other unofficial source.
Mobile Wallet
you were looking for a wallet that you could use on the move, then we’re talking about mobile wallets. First off, you need to be very careful when it comes to distinguishing between crypto company mobile apps and mobile wallets. Coinbase, Binance, NEXO, Crypto.com apps, etc. are just mobile versions that allow you to access your exchange accounts.
You don’t hold the keys, the exchange does.
Second, if you’re going to be using a mobile wallet to self-custody your crypto, then I definitely wouldn’t keep large stacks in it.
It’s not needed, especially if the stated purpose of a mobile wallet is to conveniently access your crypto.
Trust wallet is a good pick and maybe one of the most well-known in the space, and its finances make it an official exchange wallet. It also has wide-ranging support and can actually be used as a mobile Web3 wallet, so you could quite literally do all your DeFi activities on the move
Hardware Wallet
Now all of the self custody solutions I’ve presented so far are for free wallet options. However, if you want the best protection that SATs can buy, then a hardware wallet is your best bet. It’s also where I keep 95% of my crypto.
So What Is A Hardware Wallet?
Well, it’s a small device that is specifically built for the purposes of storing private keys and signing transactions. They are simplified from a functionality point of view specifically to avoid the potential of external hacks. They are quite simple, single-purpose devices that store your private keys in a cold environment.
And by that I mean the keys are never exposed to the internet as they’re always kept on the device itself. This is in contrast to all the other ones that I mentioned above that could be exposed to malware, keyloggers, etc. This basically means that it’s almost impossible for anyone to steal your crypto unless they have the physical devices with them and even if they do they would need the devices PIN code to unlock it.
