Non-custodial wallet and why do we have to own one
What is a non-custodial wallet? How is it different from a regular exchange wallet? And why do we need to use a non-custodial wallet to join DeFi? Let’s find out in this article below.
What is a non-custodial wallet?
A non-custodial wallet is a type of software on a computer or mobile device that helps storing Crypto assets, allowing users to have full control of their assets with the private key or passphrase associated with the wallet.
It can be understood simply that when you own a non-custodial wallet, no one (including the wallet provider) has the right to freeze, access or trade the user’s assets, except the users themselves. Non-custodial wallets only provide users with an interface to directly interact with assets stored on-chain on the Blockchain.
To create or restore a non-custodial wallet, you need to use a key. There are 2 types of keys to note:
- Passphrase (Mnemonic Seed): Contains 12 to 24 English keywords in order.
- Private key: Is a string of characters in alphanumeric format that is also stored on your device.
These two pieces of information are encrypted and stored in a secure area on the mobile device that only the user can access. This is extremely important information, so after creating a non-custodial wallet, you must save your private key and passphrase immediately to back-up the wallet or restore the wallet for future use cases.
Advantages of non-custodial wallets
- Users have full control over assets: This is the biggest advantage that users find in non-custodial wallets. You do not need to depend on any third party, not afraid of the exchange collapsing, not afraid of the exchange being hacked because the property is still in your hands. In addition, you can also transfer assets to the exchange to trade or receive coins to your wallet anytime and anywhere. All information is transparently stored on-chain and transactions are verifiable.
- Security: The risk of information theft in non-custodial wallets is very low. Because with non-custodial, you do not need to KYC (verify your identity), provide personal information to any organization. Everything is transacted based on the wallet address.
- Instant experience: No need to authenticate by a third party, every transaction is made on a non-custodial wallet almost instantly and is confirmed by the user himself.
Popular non-custodial wallets
You can refer to and use some popular non-custodial wallets such as Metamask, Trust Wallet, Coinbase,… In addition to the popular existing non-custodial wallets, MMC Wallet is predicted to become an excellent choice for users.
MMC Wallet is a cutting-edge non-custodial crypto wallet designed to enhance privacy for all supported assets and OTC Trading. MMC Wallet has a wide range of features and benefits:
- Store thousands of coins and tokens on the biggest blockchains.
- Trade tokens directly on the wallet.
- Social login included.
- Include Gasless Transaction and Gas Paid in ERC20 Tokens technology.
- Enhance privacy with Stealth Address, Shield Transaction and Multi-Party Computation
Frequently asked questions about Non-custodial Wallet
What are non-custodial wallets used for?
Non-custodial wallets are used for storing Crypto assets of different blockchains. Depending on the application, you can trade coins directly and manage assets on different wallet applications.
In addition, non-custodial wallets also help you access and use services and features of decentralized finance (DeFi) applications, which custodial wallets do not allow you to do.
What types of crypto assets does this wallet store?
Depending on each non-custodial wallet application, it will support different blockchains, such as Bitcoin, Ethereum, Binance Chain, Binance Smart Chain, TRON, Solana, and more.
While custodial wallets only store coins listed on exchanges, with non-custodial wallets, you can store any coin/token as long as they adhere to the supported token standards on the respective blockchains.
Some popular token standards include ERC-20 (Ethereum Blockchain), TRC-20 (TRON Blockchain), SPL (Solana Blockchain), BEP2 (Binance Chain), BEP20 (Binance Smart Chain),…
Does storing on a non-custodial wallet incur fees?
To transfer coins or receive coins into a non-custodial wallet, you won’t need to pay fees to the developers of the non-custodial wallet application.
However, you will incur a minor fee to the miners/validators to verify transactions on the blockchain, known as gas fees.
Can the wallet be linked to an exchange?
A non-custodial wallet does not directly link to centralized exchanges (CEX). Therefore, to buy or sell crypto, you need to transfer the amount of coins stored in the non-custodial wallet to a CEX.
On the other hand, a non-custodial wallet can directly link to decentralized exchanges (DEX). You can link your non-custodial wallet to platforms like Uniswap, Sushiswap, 1Inch, and others to trade and exchange coins as usual.
Conclusion
If you want to participate in the world of DeFi, experience trading on DEX or AMM platforms, or simply speculate on DeFi tokens — tokens that are not yet listed on exchanges, then a non-custodial wallet is an essential component of those experiences.
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