Remember the egregious breach that exposed Ledger’s entire trove of customer data to the public?
Your Wallet May Not Be So Secure. The hardware wallet company and e-commerce vendor Shopify have been slapped with a class-action lawsuit for failing to contain the damage. This should be a wake-up call for you as a cryptocurrency investor. It would help if you never grew complacent over the security of your hot and cold digital wallets. But what if you could still risk getting “phished” or “wallet hacked?”
Most cryptocurrency wallets are centralized and prone to man-in-the-middle attacks and many other hacks. For wallets to be truly secure, they need to be decentralized. Here’s why.
Control of Funds
Decentralized crypto wallets are non-custodial. This means you, the user, have exclusive access to your wallet’s private keys (not a third-party custodian). Consequently, you stand in a position to exercise complete control over your crypto funds.
A cryptocurrency wallet that has nothing to do with a third-party intervention doesn’t compromise security. For instance, Ledger is the case, and many such centralized wallets are susceptible to despicable hacks. Decentralized wallets, hands down, are way more secure than wallets hosted by crypto exchanges or custodial wallets. Users keep the private keys themselves, as discussed in the previous point.
As with most custodial wallets, they are integrated into a larger ecosystem built around a particular crypto exchange, DeFi trading platform, or other flagship product. This increases the risk associated with the stored funds in these crypto wallets. Exchanges such as Binance, Coincheck, Bitrue, Bithumb, and Poloniex have a marred history of facing the brunt of brutal online robberies. Mt.Gox, a Tokyo-based crypto exchange, underwent the largest hack in 2014. They eventually filed for bankruptcy because of a prolonged attack that deprived users of 740,000 BTC.
For non-custodial Defi exchange wallets, that is not the case since there is no instance of crypto balances or trading data being stored on a centralized server. On the positive side, a DeFi wallet helps you connect with a plethora of DeFi protocols that operate on a purely peer-to-peer basis without intermediaries.
No Requirement for KYC Procedures
Another feature that makes non-custodial wallets secure is the non-requirement of users to go through elaborate KYC (know-your-customer) procedures or share background information. KYC reduces the risk of doxxing or data breaches, which happened with Ledger.
However, centralized wallets, as usual, are operated by specific entities and custodians that seek to comply with the regulations in their respective jurisdictions. So, users have to share their ID data before depositing, withdrawing, or trading cryptocurrency crypto funds for reasons related to compliance.
Non-Custodial Wallets Are the Way Forward…
All of the above is true for non-custodial wallets with a decentralized crypto wallet app, to gain access to many DeFi opportunities on the go and explore a world of limitless possibilities. And not just with DeFi, you can also leverage such a wallet to play and experiment with non-fungible tokens (NFTs).
So, it becomes clear from the above points how non-hosted wallets can improve your crypto funds’ security quotient. How decentralized crypto wallets can let you interact seamlessly, intuitively, and securely with Web3 technologies while maintaining the core ideology of “being your bank.”
…But the Road to Wallet Decentralization Has Been Long and Winding
Contrary to what you think, the journey in wallet innovation has taken its own sweet time. As Rome was not built in a day, similarly, these non-custodial wallets that guarantee absolute usage of freedom result from research and development over the past few years.
Crypto wallet engineering teams worked tirelessly and drastically improved their underlying architecture. At the same time, they work to include other asset management tools, allowing investors and users to smoothly and securely access the next generation of financial products. The result is nothing less than a wonder!
Non-custodial decentralized wallets ensure the complete safety of your stored funds without relying on third-party institutions to guarantee the “well-being” of your assets. Something that Satoshi envisioned when he released Bitcoin’s whitepaper.
The early years saw crypto wallets with poor, crude, and inefficient user interfaces dominate the market. But things have taken a very different turn on the wallet front in the last few years. With DeFi’s boom, many wallets have significantly changed their designs and architecture and are helping create better user experiences.
However, very few wallets provide a single entry point into a greater ecosystem that allows you to tap into the world of DeFi. Eidoo is one such decentralized crypto wallet app. People call It the Swiss Army Knife of Wallets because of its geographic origins and available tools.
It enables users to hold Bitcoin, Litecoin, Ethereum, and all ERC-20 tokens. Eidoo helps you manage DeFi tokens as well as implement yield farming strategies. Its palette of functionalities exceeds the definitions of a conventional wallet. It hosts an entire arsenal of features to make the life of investors easy.
Control your Crypto
While the ERC20 wallet is the flagship product, Eidoo is the perfect solution for maintaining and controlling cryptocurrency assets in a way independent of the prying eyes of a third-party custodian. The latter always has an advantage in comparing custodial vs. non-custodial wallets, and Eidoo can be your go-to non-custodial wallet.
Non-custodial wallets are secure because they give you complete control over your crypto funds. The risk of a data breach or fund pilferage is substantially less. There is just one primary drawback. You must always keep your private key safe and tucked away. You are the only one responsible for the safety of your funds.
Nonetheless, given the explosive growth that cryptocurrencies, especially Ethereum and all ERC20 tokens, have experienced in the last year, you’d be better off storing your digital asset holdings in a non-custodial wallet.