Choose your crypto storage wisely.
What is the one thing that all cryptocurrency enthusiasts, from experienced traders to first-time investors, have in common? Regardless of your income, you have to use a crypto wallet to store your digital assets. Each year, crypto wallet technology is updating rapidly, aiming to make your coin storage process ultimately secure and convenient.
Modern cryptocurrency wallets are somewhat similar and differ based on the additional services they offer. These apps and devices allow you to store multiple assets and even buy, sell, and exchange them. The more sophisticated wallets will enable you to interact with dapps, stake coins, hold NFTs, and equip you with the latest safety measures. Although extended functionality matters, there is a thing that one should consider first.
The key difference between crypto wallets is custody.
Custody and Crypto: To Own or Not To Own
The topic of custody is not an easy one. On the one hand, the whole idea behind cryptocurrency was to give people control over their money. So why would you intentionally give it up? On the other hand, control means responsibility, and that doesn’t always end well. Before you accuse us of being overly dramatic, here’s the number to think about: over 20% of Bitcoins in circulation are lost due to forgotten passwords and private keys.
Custodial wallets, a popular option offered by crypto exchanges and other service providers, keep your private keys on their side. This means they also get full control of your funds, which can be a good and a bad thing at the same time. On the bright side, you’ll never have to worry about losing access to your assets due to lost passwords. And yet, the ‘not your keys, not your coins’ rule is a no-go for many experienced crypto users.
Which Wallet to Choose?
At the end of the day, it all comes down to your personal needs and principles. For instance, if you couldn’t care less who owns your assets as long as they are well-protected and you want to be able to exchange them for fiat immediately, Mercuryo wallet will be your number one choice. It’s fast and makes daily operations with crypto as smooth as possible.
Here’s a more specific example: a full-time intraday crypto trader uses the exchange’s custodial wallet. He might not be interested in holding any crypto whatsoever and withdraw daily profits in fiat. Alternatively, a trader might choose to exchange a certain amount of crypto for stablecoins to lock in profit without switching back and forth between fiat and crypto. And in this case, it’s up to the trader to keep the stablecoins at the exchange or transfer them to safer non-custodial storage or even hardware device like Trezor.
Now think a small business owner who plans on buying an apartment, regularly invests in crypto, and uses it as a store of value as her national currency suffers from heavy inflation. She doesn’t work with crypto daily and only buys a fixed amount of coins once a month. Also, she doesn’t trust her country’s banking system. To ensure the safety of her cash, she chooses to store her hard-earned savings in Trustwallet. It’s one of the most popular non-custodial wallets, and also a partner of Mercuryo, so she knows she’s the only one who controls her funds.
While experienced crypto users would most likely go for one of the non-custodial solutions, millions of new users have no clue what they are doing. That is the main reason why many crypto-related businesses decide to offer custodial wallets to their users.
The problem with non-custodial solutions is that the public is still not adequately educated on cryptocurrency basics: people assume that passwords and PINs protect their accounts. The concepts of end-to-end encryption, private&public keys, and seed phrases are still new. Even if the wallet provider doesn’t allow you to create an account until you write down your mnemonic, explaining that a seed phrase is the only way to access your wallet once you log off, there will always be people choosing to ignore this info. As a result, they lose their seed phrases and assets for good. In this case, sharing custody with an intermediary that guarantees the safety of your money seems like a not-so-bad decision.
Custody is a tricky matter. When choosing to be your own bank and store digital assets in a non-custodial wallet, you need to be aware of the responsibility that comes with it. In this case, keeping your seed phrase and private keys safe lies solely on you. Unfortunately, a significant percentage of people are not properly educated on how crypto wallets work. Lost seed phrases and abandoned wallets are still a common occurrence.
Custodial wallets, in turn, offer an easy way out of it: they will take care of your funds if you’re willing to give up full control. For some people, this means convenience. For others, it’s simply unacceptable.
Both solutions can work perfectly, and it all comes down to your personal needs and financial routine. Whatever you do, choose your crypto storage wisely.