After the downfall of many crypto exchanges like FTX in recent times and tokens like Terra. The need of self custody wallets are on the rise.
You almost certainly have a physical wallet in which you keep your cash and credit cards. You might even have a digital wallet like Apple Wallet, Google Wallet or Venmo. A self-custody wallet is a storage location for digital money such as cryptocurrency and other digital assets. To transact with blockchain-based financial applications such as the Web3AssetManager and other DeFi applications, self-custody wallets are required.
You will need digital money such as digital dollars USDC, DAI, or other cryptocurrency to participate in DeFi and earn interest or invest in more complex fixed-income products. However, you cannot save them in your Apple Wallet. You will require a self-custody wallet.
Self-custody wallets actually store “private keys,” which allow you to securely access your blockchain-based assets like Bitcoin and Ether. Each private key corresponds to a public key, which is also referred to as the wallet address. To transact on blockchains, a pair of public and private keys are used together. This pair is one-of-a-kind, and most self-custody wallets generate it using proprietary algorithms.
What is the purpose of the keys? The public key serves as an identifier for your blockchain account. Consider it similar to a shared email address. You get money by giving someone your wallet address (public key).
The private key, on the other hand, is used to sign and approve the transfer of digital money, much like your email password. The private key is only accessible to the wallet’s owner. Passwords and private keys must be securely stored and never shared. A private key corresponds to your public key and is used to confirm ownership of your funds. In DeFi, blockchain transactions can take many forms, including sending digital money, depositing digital dollars into Web3AssetManager, and accessing services such as borrowing, investing, and trading.
Because you have control over the private key, you have sole possession of your digital money or other digital assets. Because your private key is not stored anywhere else, it is your responsibility to keep it secure. Instead of relying on a financial intermediary, you have access to your funds 24 hours a day, seven days a week. This adaptability enables you to participate in DeFi.
Types of self-custody wallets :
Mobile Wallets
Smart Contract Wallets
Hardware Wallets
Paper Wallet
Self-custody cryptocurrency wallets are only as secure as your private key. Your wallet is kept secure by a combination of software, hardware, and common security measures, such as physical access to your wallet. If you use a mobile wallet, do not share access with anyone and keep your phone locked at all times. If possible, use a separate passcode to lock your mobile wallet application.
