Non-Custodial Wallets: Your Keys, Your Crypto

Non-custodial wallets offer users several advantages, but also come with responsibilities. Read on for what they are.

Key Takeaways:

• Non-custodial wallets give you total control over your cryptocurrency, allowing you to manage your private keys and recovery phrase without relying on a third party.
  
• This autonomy enables you to make unrestricted transactional decisions, directly interact with blockchain networks, and connect with decentralised applications (dapps).
  
• Crypto.com Onchain is a popular choice for non-custodial wallets.
  
• Hardware wallets are a form of non-custodial wallets, providing extra protection through offline ‘cold’ storage and safeguarding your assets from online threats.
  
• Non-custodial wallets align with the original ethos of cryptocurrency — decentralisation and security — while allowing you to maintain control over your digital assets.
  
• With these benefits also come significant responsibilities, such as managing and safeguarding your private keys; losing them can result in the permanent loss of access to your funds.

Introduction

Non-custodial wallets, also known as self-custodial wallets, stand out as a secure and independent way to manage your funds, offering you complete control over your crypto holdings. 

Unlike traditional custodial wallets, where a third party holds your private keys, self-custodial solutions empower you to safeguard your financial security and maintain your privacy. Crypto.com Onchain offers users full control over their keys and digital assets. In this article, we dive into the advantages and how-to of setting up custodial hot and cold wallets.

Understanding Non-Custodial Wallets

What Is Self-Custody?

A self-custodial wallet, or non-custodial wallet, is a decentralised cryptocurrency wallet that allows users to manage their funds without third parties. Self-custody in the cryptocurrency world is all about users’ true ownership. Unlike traditional financial (TradFi) institutions like banks, non-custodial wallets give you full control over your digital assets. 

When you use a self-custodial wallet, you become the sole guardian of your private keys and recovery phrase. There is no third-party custodian who can help you recover access to your wallet should you lose your keys. 

These wallets serve as an interface to manage your digital assets on blockchains. They enable you to send and receive cryptocurrencies and connect to dapps without depending on a third party.

Self-custodial wallets come in two main types:

• Software Wallets: Available as apps on your computer, phone, or tablet, or as browser extensions. These ‘hot’ wallets are connected to the internet, making them convenient but potentially less secure than hardware wallets.
  
• Hardware Wallets: Physical devices (or even paper) that store your private keys offline in ‘cold’ storage, offering enhanced security but less convenience for frequent transactions.

Custodial vs Non-Custodial Wallets

The primary difference between custodial and non-custodial wallets is who controls the private keys. In custodial services, a third party holds your private keys, much like how banks hold your money. In contrast, self-custodial wallets put you in complete control of your assets, akin to storing cash in a home safe.

With Crypto.com, you can choose between the Crypto.com App as a custodial wallet and Crypto.com Onchain as a non-custodial wallet. Crypto.com as the custodian can help you recover access to the App and also offers insurance for funds lost to hacks. Crypto.com Onchain, on the other hand, offers you full control and responsibility over your funds.

Benefits of Self-Custody

Complete Control Over Assets

With a self-custodial wallet, you have full ownership and control of your cryptocurrency. This independence allows you to:

• Send and receive funds without restrictions.
• Interact directly with blockchain networks.
• Customise transaction fees.
• Connect to dapps.

Enhanced Security Measures

Non-custodial wallets are often considered more secure than custodial alternatives that can be prone to hacks. However, ultimately this comes down to how carefully you store and handle your keys. In addition, many tier-one exchanges like Crypto.com mitigate this with security measures that shield users’ assets in custodial wallets.

Security advantages include protection against potential mishandling of funds by third parties and multiple storage options, including hardware wallets for cold storage. Some wallets also offer advanced features like biometric backup or cloud backup to help you restore access if needed.

Increased Privacy

Privacy is a significant benefit of self-custodial wallets, which allow you to transact more anonymously and protect your personal information. Unlike custodial services that often require identity verification, self-custody enables you to use crypto without sharing extensive personal data.

However, it’s important to note that, while self-custodial wallets offer increased privacy, transactions on public blockchains are still transparent. Anyone can view transaction histories of wallet addresses using blockchain explorers.

How to Use the Non-Custodial Crypto.com Onchain

As the demand for self-custodial solutions grows, platforms like Crypto.com have responded by offering tools that make self-custody more accessible and user-friendly. One such tool is Crypto.com Onchain, which is designed to give users full control over their crypto assets while maintaining ease of use and robust security features.

What Is Crypto.com Onchain?

Crypto.com Onchain is a non-custodial wallet that allows you to store, manage, and interact with your cryptocurrency without relying on third parties. Unlike custodial wallets offered by exchanges, where the platform holds your private keys, Crypto.com Onchain ensures that only you have access to your private keys and recovery phrase.

Key Features of Crypto.com Onchain

1. Full Ownership and Control:
   • Crypto.com Onchain allows you to maintain complete control over your digital assets, giving you the autonomy to manage your funds without any intermediaries. Your private keys are stored locally on your device, ensuring that only you have access to them.
     
2. Seamless Integration With DeFi Services:
   • The wallet is designed to integrate smoothly with decentralised finance (DeFi) protocols, enabling you to participate in a wide range of DeFi activities, such as staking, lending, and swapping tokens. This makes it easy to grow your crypto holdings while maintaining full custody of your assets.
     
3. Enhanced Security Features:
   • Security is a top priority for Crypto.com Onchain, which includes features like biometric authentication, two-factor authentication (2FA), and optional passcode protection to ensure your assets remain secure. Additionally, since the wallet is non-custodial, the risk of hacking or fraud targeting a centralised exchange (CEX) is significantly reduced.
     
4. User-Friendly Interface:
   • Despite its advanced features, Crypto.com Onchain is designed to be user-friendly, making it accessible even to those who are new to self-custody. The intuitive interface allows users to easily manage their assets, view transaction history, and explore DeFi opportunities directly from the wallet.
     
5. Backup and Recovery Options:
   • To protect against the loss of access to your wallet, Crypto.com Onchain offers a secure recovery phrase that can be used to restore your wallet on another device. It’s crucial to securely store this seed phrase, as losing it could mean losing access to your funds. In addition, Crypto.com offers a native backup option for your recovery phrase via iCloud and Google Drive.

How to Get Started With Crypto.com Onchain

• Download and Setup: Begin by downloading Crypto.com Onchain. Once installed, you can create a new wallet by following the on-screen instructions. During setup, you’ll be prompted to write down your recovery phrase — be sure to store it in a safe place.
  
• Transfer Funds: After setting up your wallet, you can transfer cryptocurrency from an exchange or another wallet into Crypto.com Onchain. This step will allow you to take full control of your assets and start managing them independently.
  
• Explore DeFi Opportunities: With your funds secured in Crypto.com Onchain, you can explore various DeFi opportunities directly from the app. Whether you’re interested in staking, lending, or swapping tokens, the wallet provides easy access to these features while ensuring your assets remain under your control.

Self-Custody With Hardware Wallets — How to Pair Trezor and Ledger With Your Crypto.com Account

For those who prioritise the highest level of security in managing their cryptocurrency, hardware wallets are a popular choice. Devices like Trezor and Ledger offer cold storage solutions, keeping your private keys offline and away from potential online threats. Pairing these hardware wallets with your Crypto.com account combines robust security with the convenience of accessing your digital assets.

Why Use Hardware Wallets?

Hardware wallets, such as Trezor and Ledger, provide a secure method of storing your private keys offline. By doing so, they significantly reduce the risk of hacking, phishing, or malware attacks. These wallets are ideal for long-term storage of large amounts of cryptocurrency, or for users who prefer an added layer of security when interacting with blockchain networks.

Key Features of Hardware Wallets

• Offline Storage: Private keys are stored offline, which prevents unauthorised access via the internet.
  
• Tamper-Resistant Design: Hardware wallets are designed with built-in security features that protect against physical tampering.
  
• Backup and Recovery: Most hardware wallets come with a recovery phrase that allows you to restore your wallet if the device is lost or damaged.

Setting Up Your Hardware Wallet

• Trezor:
  • Visit the Trezor website and download the Trezor Suite software.
    
  • Follow the on-screen instructions to initialise your Trezor device, which includes setting up a PIN and writing down your recovery phrase.
    
  • Once set up, your Trezor is ready to store your private keys securely.
    
• Ledger:
  • Download the Ledger Live software from the Ledger website.
    
  • Follow the setup process, which includes selecting a PIN and securely storing your recovery phrase.
    
  • After the setup is complete, your Ledger device will be ready for use.

Regularly Update and Back Up

• Always ensure that your hardware wallet’s firmware is up to date to benefit from the latest security features.
  
• Regularly back up your recovery phrase and store it in a secure location.

Can You Pair Trezor and Ledger With Your Crypto.com Account?

To combine the security of a hardware wallet with the functionality of your Crypto.com account, you can pair your Trezor or Ledger via an extension wallet. 

Here’s how to connect to Ledger.

Here’s how to transfer from your Crypto.com account to Trezor.

Challenges and Responsibilities

While self-custodial wallets offer numerous benefits, they also come with significant responsibilities. To maximise the advantages of these wallets, it’s essential to understand and manage several key aspects.

Safely Managing Private Keys

Your private keys are the gateway to your crypto assets. Think of your public keys as a bank account number and your private keys as the PIN — never share the latter with anyone. With self-custody, you ensure that your assets are safe because only you have access to your digital assets. However, this also means you must safeguard these keys diligently.

Importance of Backups

Backing up your wallet is crucial to protect against the loss or theft of your device. Many self-custodial wallets offer various backup options, such as a recovery phrase, biometric backup, or cloud backup. Regular backups ensure that you can restore access to your wallet if needed.

Security Best Practices

To maximise the security of your non-custodial wallet:

• Use a hardware wallet for long-term storage.
  
• Distribute your recovery phrase and store copies in different locations.
  
• Regularly update your hardware and software wallets.
  
• Encrypt and back up your wallet files for added security.

Conclusion

Self-custodial wallets offer a powerful way to manage digital assets, providing users with complete control, enhanced security, and increased privacy. However, this independence comes with the responsibility of safeguarding private keys and following best practices to protect your investments. As the crypto world continues to evolve, self-custodial solutions are likely to play an increasingly important role in how people interact with digital currencies.

Due Diligence and Do Your Own Research

All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, cybersecurity, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any coins, tokens, or other crypto assets. Returns on the buying and selling of crypto assets may be subject to tax, including capital gains tax, in your jurisdiction. Any descriptions of Crypto.com products or features are merely for illustrative purposes and do not constitute an endorsement, invitation, or solicitation.

Past performance is not a guarantee or predictor of future performance. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility.