Ever since the FTX scandal broke, cryptocurrency investors swear by hardware wallets.
Custodial wallets are simply wallets managed by a third party such as a cryptocurrency platform or exchange. In other words, if the exchange controlling your wallet is hacked or goes bankrupt, you risk losing your funds.
On the other hand, non-custodial wallets (or non-custodial wallets) add an extra layer of protection to your cryptographic assetsas they give you full control over your funds.
Contrary to what one might think, mismanagement and misappropriation of funds are not the biggest risks of custody portfolios. In fact, the biggest downside to these wallets is their vulnerability to hacks. And as we all know, Hacks are commonplace within the crypto sphere.
In October, cryptocurrency exchange Binance suffered a hack that cost it $570 million. To achieve their ends, the hackers used the BSC Token Hub service, the blockchain bridge of BNB Chain, to create and withdraw 2 million BNB tokens.
Similarly, within hours of filing for bankruptcy, FTP extension suffered an attack that cost him hundreds of millions of dollars. While the causes of the incident remain unknown, many members of the crypto community are convinced that it was not an actual hack.
The incredible rise of hardware wallets
As the crisis of confidence has slowed activity on cryptocurrency exchanges, hardware wallets have gained traction in 2022. Yes, the misfortune of some is the happiness of others.
Trezor, one of two industry leaders, saw its traffic soar 350% in the days following the FTX bankruptcy. Similarly, sales of the company’s hardware portfolio more than tripled.
Hito, a wirelessly rechargeable hardware waller, was also hugely successful around the same time. “The sector has grown. Ledger doubled its revenue in the month following the FTX crash. Shortly before that, the parent company of the crypto wallet announced a partnership with Binance,” said Mikhail Kirillov, CEO of Hito.
“Although Hito announced its pre-sale less than six months ago, we have seen an upward trend in sales since FTX went bankrupt.”
This renewed interest in hardware wallets is completely normal, as these wallets are more in line with the principles of Bitcoin. Indeed, Satoshi Nakamoto, the anonymous founder of the world’s first cryptocurrency, wanted to cut out the middleman. “With a digital currency based on cryptographic evidence, money will be safe and transactions will be easier”reads a post published in 2009 by Satoshi Nakamoto.
There are different types and sizes of hardware wallets. Smaller ones, like the Ledger Nano line of wallets, look like a thumb drive and can be clipped onto your keychain. The larger ones, like NGRAVE ZERO or ELLIPAL Titan, are about the size of a small phone. They all come with additional features, such as dust protection, etc.
Hardware wallets are part of what are called cold wallets or cold storage wallets. It is a hardware or software tool that allows you to store your encryption without connecting to the internet. Some wallet developers, such as MetaMask, offer cold wallet software to their users.
Hardware wallets aren’t the only solution
For all their advantages, hardware wallets are not unanimous. Changpeng Zhao, CEO of Binance, said last month that “99% of people risk losing their cryptocurrencies if they opt for self-custody.” CZ’s estimate is exaggerated, but let’s not forget that hardware wallets only really gained ground after the Terra Luna, Celsius and FTX scandals.
“Only time will tell,” says Hito CEO Mikhail Kirillov. “But with $70 billion in losses from the collapse of Celsius, Terra and FTX alone, it appears that leaving your cryptocurrency on an exchange is much riskier than losing a device. (which doesn’t matter anyway). That said, the adage “not your keys, not your cryptocurrencies” is an inescapable lesson that users have learned the hard way.
“If you lose your device, don’t worry; as long as you keep your passphrase backed up, you can safely access your funds. Yes, we think it’s time users had the tools to trust themselves, rather than trusting cryptocurrency exchanges. Hito is one of the easiest tools they can use.”
There are also software wallets that put you in control of your cryptocurrency. For example, Atomic Wallet gives you the ability to store your digital assets securely on your computer. Recently, Zerion and Frontier launched easy-to-use browser extensions that support multiple types of crypto assets, including non-fungible tokens (NFTs).
Which Place for Decentralized Exchanges (DEX)?
If you are more of a trader than a HODLer, you can opt for a DEX. “Decentralized exchanges should not be confused with centralized exchanges like Coinbase and Binance”says Ravindra Kuma, founder and CEO of Frontier.
“Centralized cryptocurrency exchanges hold your assets for you and must always verify your identity. Decentralized exchanges do not require KYC (customer knowledge)they do not require the creation of an account and allow you to trade directly with other people”.
Moral of the story: You already know, if you don’t own your private keys, you don’t own your cryptocurrency.
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