Exploring the Exciting Use Cases of Decentralized Finance (DeFi) – Part 5

Decentralized Finance (DeFi) is a new and volatile financial sector that people need to update information every day to keep up with its development. In this article, let's follow FinFan to learn about another application of DeFi – a self-custodial (non-custodial) wallet in the Web 3.0 space.

What is a self-custodial (non-custodial) wallet?

In real life, when you want to keep your money or cards, you need a wallet to do this. In the internet world, too, to store our money and link it to the bank, we also need to have our own digital wallet. In the Web 2.0 world, it is an e-wallet, then in the crypto world, we need a form of wallet that can help us manage all assets such as Bitcoin, Ethereum, VERSE, etc., we need to use one type of wallet a non-custodial (self-custodial) wallet.

Are all the crypto wallets self-custodial (non-custodial)?

The answer is “No” because some cases, centralized cryptocurrency exchanges like Binance and Coinbase provide you with custodial wallets and can manage your assets by the rules of these exchanges. Just like in real life, banks can hold all your assets on your behalf, requiring you to trust they will not misuse your assets.

However, sometimes when the rules are changed or affected by inflation, you can also lose your assets, just like if you had sent 120.000VND money in the savings account of the bank 20 years ago in Vietnam, you would have received the money equal to 3 boats of Pho.

What are the differences between non-custodial (self-custodial) and custodial wallets?

Self-governance of wallet

As mentioned above, with a self-custodial (non-custodial) wallet, we can self-manage our assets on the crypto platform. However, for all the risks that follow, you will also have to take responsibility for yourself if you do not keep it well or have a reasonable investment plan.

Wallet security

Just like other crypto-related applications, with decentralized and consensus mechanisms, no one can monitor or steal your information and thus the security and safety of your application are more complete in cyberspace.

Speed of transferring or converting cryptocurrency to fiat currency.

If you use a custodial wallet, transferring money from one wallet to another will take more time (due to the different mechanisms between non-custodial and custodial wallets).

Furthermore, converting between cryptocurrency and fiat currency is also extremely difficult due to the problem of exchanges being able to connect with conversion agents to be able to convert crypto to fiat, which can be quite a long time.

Meanwhile, by using a non-custodial wallet, you only need to deposit money on appropriate on/off-ramp services or use a service linked between FinFan and TrippleA to make the conversion. With this approach, the conversion will be faster and safer.

How do I know if I'm using a self-custodial wallet?

All self-custodial crypto wallets enable you (and only you) to possess the private key associated with your public address. This typically takes the form of either a file or a 'mnemonic phrase' that consists of 12-24 randomly generated words. If your wallet doesn't have this option, it's custodial (meaning you're not in full control of your crypto assets).

Which famous companies in the market are currently launching self-custodial (non-custodial) wallets?

MetaMask

MetaMask is one of the leading companies in the crypto market for self-custodial wallets. Their mission is to democratize access to the decentralized web, and through this mission, to transform the internet and world economy to one that empowers individuals through interactions based on consent, privacy, and free association.

Founded by Aaron Davis and blockchain company ConsenSys, MetaMask is a popular and established browser extension that functions as a cryptocurrency wallet connected to the Ethereum blockchain.

Trust Wallet

Another wallet that is also compatible with the Ethereum blockchain is Trust Wallet. Unlike MetaMask, Trust Wallet can only be used via the wallet app on mobile phones.

Trust Wallet also supports staking and connects to decentralized applications. Launched in 2017 and purchased by Binance in 2018, Trust Wallet is a popular cryptocurrency wallet. Used by over 60 million people, Trust Wallet is free to download and maintain. It was originally launched as a mobile app for iOS and Android.

Bitcoin.com

Bitcoin.com initially developed as a news channel about Bitcoin and the crypto world with many comments from leading experts on this financial market as well as a number of other related markets. Since 2015, Bitcoin.com has been a global leader in introducing newcomers to crypto.

Accordingly, the release of a self-custodial wallet is a step for this news site to be able to exploit well the pool of users who are interested and want to learn about this market.

*The Bitcoin.com Wallet app, which is fully self-custodial, also offers a cloud backup service (in addition to giving you the option to store the private key for each of your wallets as a mnemonic phrase). With the cloud backup service, you create a single custom password that decrypts a file stored in your Google Drive or Apple iCloud account.*

*Source by Bitcoin.com

Financial giants are planning to invest in or cooperate with non-custodial wallets.

Mastercard

Recently on October 24, on one of the leading crypto market news sites Coinbase, there was an article sharing about Mastercard wanting to cooperate with big non-custodial wallets in the market.

Accordingly, this leading US card developer said: "Adding Mastercard's card payment feature will help non-custodial wallet companies have more active and loyal members. At the same time, this combination also helps cardholders connect to cryptocurrency spending more easily.”

Pavel Durov, founder of Telegram, has announced that the company will launch a series of decentralized cryptocurrency products, including a decentralized exchange (DEX) and a non-custodial wallet at the end of last year.

At that time, the release of this rumor was a big surprise for the crypto world because at that time the world economic crisis had begun, and the crypto world also had to go through many bad things from Do Kwon's escape. to the conviction of Sam (creator of FTX - the cryptocurrency exchange that was once ranked 2nd in the world before going bankrupt).