The world of cryptocurrencies is constantly changing, with new tokens being released regularly. While many people are familiar with popular cryptocurrencies like Bitcoin, Ether, and Solana, there are constantly new tokens entering the market. For those who want to hold cryptocurrencies, there are two main options for storing them: centralized exchange (CEX) wallets and private, self-custodial wallets. Both options have their pros and cons.
CEX wallets are like traditional bank or brokerage accounts, where the exchange holds the tokens on behalf of the user. This means that the exchange actually owns the tokens, and if something were to happen to the exchange, the user would have no way to retrieve their funds. This lack of control has led to the saying “not your keys, not your coins,” encouraging users to take direct ownership of their tokens. While CEXs are a convenient option for beginners, it’s important to be cautious and limit exposure to potential risks.
Self-custodial wallets give users complete control over their tokens. These wallets generate a unique seed phrase or private key that the user must keep secure. As long as they have this key, no one else can access or control their funds. Self-custodial wallets can come in different forms, including browser extensions, desktop or mobile apps, or hardware wallets. There are hot wallets, which are connected to the internet and more vulnerable to hacks, and cold wallets, which are offline and only connected when necessary.
Crypto wallets are constantly evolving to provide better security and simplicity. Some wallets now offer recovery options through trusted contacts or utilize biometric security features. Multisignature wallets require multiple approvals for transactions, adding an extra layer of security. One example of a self-custodial wallet is Trust Wallet, which supports over 100 blockchains and can be downloaded as a mobile app or browser extension.
To set up Trust Wallet, users need to download the app and create a new account. They will be assigned a seed phrase, which they must write down and keep secure. Once the setup process is complete, users can fund their wallet by purchasing tokens directly through the app or by transferring them from a CEX account. Funding a crypto wallet through a mobile app involves choosing the desired token, selecting a provider for the transaction, entering payment details, and completing the transaction.
Moving crypto assets from one wallet to another is also relatively simple. To transfer crypto from Coinbase to Trust Wallet, users need to select the specific cryptocurrency, enter the Trust Wallet’s receiving address, and confirm the transaction. Transferring from MetaMask to Trust Wallet follows a similar process of selecting the token, entering the Trust Wallet address, and verifying the transaction details.
Self-custodial wallets have come a long way, but there are still challenges to overcome. Users need to be cautious with their seed phrases and private keys to avoid losing their tokens. Transferring wallet ownership to others can be complicated. Future self-custodial wallets may incorporate biometrics and additional layers of authentication to make them more user-friendly and secure. The adoption of self-custodial wallets is focused on giving users control over their crypto assets and accessing opportunities in the cryptocurrency ecosystem.
