Trust is an Expensive Thing

Cryptocurrency needs to be stored somewhere. You can also send and receive it from whomever you want. You don’t want to trust anyone with your hard-earned money. Have multiple cryptocurrency wallets - both custodial and non-custodial.  Why? 

• Custodial Wallets 

You might be familiar with a wallet address (26 to 35 strings of random characters), but not a private key (64 characters). If so, it’s more likely you’ve interacted with a custodial wallet.You don't own its private keys, meaning you don't own the coins you buy. The wallet address is like your bank account number, but the private keys that come with it are like your PIN (Personal Identification Number). These are the Web 2.0 wallets you're used to.

They may be convenient for those short term trades one makes when the markets are up. Examples include Coinbase or KuCoin, etc. Hundreds of them are out there.  No worries. No need to sign up to all of them to experience the wild world of crypto. 

However, it can be overwhelming. This entails logging in with your personal information like your email, password, often your phone number and address, also known as KYC (Know Your Customer). You could also have unique email addresses for every wallet you sign up to. See how overwhelming it can be?

Much like a bank, the company looks after your funds and has full access to your money. You might know the disadvantages of this. Reports abound of banks and centralized financial institutions holding your wallet for a variety of complicated reasons best known to you. Not to mention the hacks, bankruptcy and rogue employees - single points of failure that we now know as normal.

How about another normal where you have full custody of your funds, when and where you send them, and how? 

• Non-custodial Wallets 

These types are for playing the long game. Many non-custodial wallets are out there. No need to sign up to all of them, however, to interact with specific blockchains, you might need a variety. The popular ones are Metamask, Electrum, Trust wallet, etc. Careful of the wallets you download - get those links from the official website and bookmark them. These are Web 3.0 wallets.

You would say these wallets bring the power back to you. However, that comes with specific types of responsibilities that are a bore at first. Save the 12 or 24 randomly generated phrases (the extra password), which the company has no knowledge of. Phew. Crucial because if you lost your device, just import (transfer) it to another device using the same (recovery/seed) phrase. 

Technically, your new foundling wallet cannot be deleted. However, you can lose access to your funds if you don’t save the phrase (not on your device). 

The benefits of these beauties is the extra security. That doesn’t mean it’s free from fraud.  This includes hardware wallets that look like your average USB, isolated electromagnetically, electronically, and physically from online networks. Avoid third party sites selling them. The most popular are Ledger and Trezor.

Another benefit is the ease of connecting decentralized applications (DApps) to Web 3.0. 

Paper wallets are another unpopular type, where the private keys are literally printed on paper, exposing it to the elements.

Fun fact: To avoid confusion $ coping errors, Satoshi removed 4 commonly mistaken characters from the generation process that produces the wallet address: Uppercase ‘O’ and the number ‘0’, Uppercase ‘I’ and lowercase ‘l’.

Source: University of Nicosia

Whichever wallets you decide to have, remember this article has a disclaimer - non-financial advice.

Do sign up for a custodial wallet - KuCoin