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With all the advantages that digital currencies and blockchain technology bring into our lives, they are not deprived of some risky points which you should keep in mind as a future holder of coins.
Roughly speaking, all these features may be moved to one characteristic which is the security of your crypto coins. Whatever currency you buy, its safety will largely depend on the security measures you take, and one of the most important ones is choosing the right kind of crypto wallet.
There are two types of cryptocurrency wallets: custodial and non-custodial (DeFi Wallet). In a nutshell, custodial wallets are those that store your private keys on a server, while non-custodial wallets offer full control over your funds. Now, let’s take a close look at how creating your own DeFi wallet will help to enhance the security of your funds as compared to the custodial one.
1) Only You Have to Access Your Funds
The first main difference between the wallets is- where the keys are stored. Private keys and mnemonic seeds are crucial to access your wallet in case of an emergency. If you choose a custodial wallet, it will store your keys on the server, and you will need a login id and password to access your wallet’s fund.
However, it seems easy in comparison to entering private keys, trusting a third party with your private information is not a reliable way to store the funds. On the other hand, a non-custodial or DeFi wallet encrypts and store the private keys only on the user’s device so that nobody else can access the money.
2) Custody Free and Fast Withdrawal
Trusting a third party to share your personal information means that any action you will perform with your funds should be confirmed by this third party. In this manner, custodial wallets are somehow similar to conventional banks, where transactions might take up to one business week because you need to get the approval of every step despite the size of the transaction. On the other hand, with DeFi wallet, you’ll be able to perform instant withdrawals, which makes the process speedy and efficient. Whether you want to send money to your friend or practice trading, you’ll be able to send funds in a fraction of a second.
3) Your Funds Are 100% Safe
There are many possible threats, and one of them is the chance of your cryptocurrencies being frozen due to KYC (Know Your Customer) requirements. Exchange platforms are obliged to comply with law regulations, and governments or other financial authorities have every right to ask for some additional information of users within their jurisdiction.
KYC procedure usually takes up to three-four business days, but the bank is entitled to require details in case a transaction seems suspicious. Another outcome of trusting custodial trading platforms with your funds is that the process of maintenance might freeze all the digital assets kept on the platform. The reason behind this is, exchanges care about user’s funds and their security. That’s why your crypto can be frozen if you send it on exchange. In case, if you simply hold crypto in the wallet, which doesn’t have control over your funds and your private keys, nothing will happen under any circumstances.
To Sum Up
As per the crypto market trends, DeFi wallets will continue to gain traction over custodial wallets due to the growing cases of a data breach and users becoming more conscious about the security and privacy of their data.
If you are also planning for DeFi crypto wallet development, Antier Solutions can help. We offer a comprehensive range of DeFi wallet development services to build robust, secure, and user-friendly Decentralized wallets.
Schedule a free demo of our DeFi wallet solution or connect with our subject matter experts to share your needs for a custom wallet.
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