Topic: Reasons I prefer non-custodian wallets (Read 223 times)

I see this topic as continuation of this : How to secure crypto wallets, but I don't see anything new that we haven't read many times in this board. There is no point in commenting on everything, but I'll look at a few things.


If we start from the fact that some reliable models of hardware wallets can be bought for $50 (and even up to 30% cheaper sometimes), then it would certainly make sense to invest in such a device for even less than $1000 worth of crypto. Because that value can go up a lot over time, let's just remember what happened from 2015 to 2017 when BTC is jump from $200 to $20 000.


Web wallets are especially vulnerable to phishing, which is largely due to the fact that some users do not have a habit of using the internet safely and without any checks click on every link that appears to them on e-mail, Facebook, Telegram or Twitter. But those who do not know how to protect themselves from phishing will sooner or later become victims no matter what crypto wallet they use.

This is true, they were open source before but now they completely closed source, I prefer open source wallets like electrum. You are right, open source wallets is the best.


Thanks for the correction, I will correct it.


For the sake of safety, you are completely right. Hardware wallpaper is better and safest and having just $50 larger nano is worth to even keep $200 worth of cryptocurrencies. And with time, the person will keep more.

Coinomi is closed source, and was revealed to be sending user's seeds in plain text to Google servers to be spell checked. It's a poor choice of  wallet.

An online wallet is never a cold wallet. By definition, an online wallet is a hot wallet. In your example of having two devices with a watch-only wallet on one, then the watch-only wallet should be the only one with internet access. The other wallet with the private keys is the cold wallet, and it should never have internet access.

BIP39 is your seed phrase and has nothing to do with 2FA. PINs, passwords, fingerprints are not 2FA either, they are simply different ways of unlocking the wallet on your phone. 2FA needs you to prove possession of 2 separate factors - such as a password and your authenticator app in the case of exchanges accounts.

I wouldn't store a single satoshi on a web wallet. You can get a good hardware wallet for less than $50. I would be recommending one for amounts of bitcoin far lower than $1000.

Already discussed above, but no they aren't.

That's right - I guess a better idea is "use FOSS wallets". I've been increasingly paranoid over the last few months about closed-source softwares too, and I guess this is just the beginning for me.

Hah. It's a pretty common misconception to be honest. People mostly think:

wallet you access online through the web = online wallet = custodial wallet

Regardless if it's non-custodial, I still wouldn't use it though. There's something about using non-open source software that makes me paranoid.

Are you referring to freewallet.org? I hope you are not shilling for them. They are a proven scam custodial wallet. Many aaccusations have been created on the forum. One of them- https://bitcointalksearch.org/topic/freewalletorg-is-a-scam-5128260
Check their profile- https://bitcointalksearch.org/user/freewallet-1177176

About the anonymity, I will still agree to an extent, no verification needed for non custodian wallets unlike custodian that demand for it. But that does not mean that bitcoin transaction can not still be compromised, example is the dust attack, this can reveal a lot about bitcoin addresses or the use of malware that can hack bitcoin wallets and many more. But it is true that non custodian wallets maintain anonymity to certain level unlike custodian wallets which requires 'know your customer'.

I understand what you are saying and you are right but the point is to centralized on the fact that non-cusdian wallets is more anonymous if compared to custodian wallets.

There is another one I know, freewallet, it is reputed as well. You can check about it but I can not use custodian wallets because of certain reasons I stated above, non-custodian is easy to use. Binance has not wallet than the one on its exchange not like coinbase wallet that is also separate from coinbase pro.

You are right

Good job on writing this post! I have only a few things I'd like to mention:

If a custodian wallet is as easy to be recovered as entering your e-mail and verifying some links/codes, then all a hacker needs is access to your e-mail. Which is very, very bad security! And even if you have the private key or mnemonic seed of your custodian wallet, it's completely useless if it's custodian or server-sided. You aren't the only one who owns the keys/seeds.

Secondly, I have to correct you about the anonymity: Bitcoin and other strong cryptocurrencies were not crested to be completely anonymous! Having a fully transparent cryptocurrency makes, in fact, your privacy shrink. The real anonymous cryptocurrencies are, for example, coins like Monero. Another option is to use Wasabi wallet, but only if you take proper care of all aspects about privacy & anonymity. A little mistake, however, could lead to the leakage of crucial information needed to identify you.

Now about the ease of use, there are a few fully non-custodian wallet that makes everything much easier to use. I honestly can't think of a simple wallet specifically for BTC, but Ripple had its Bread Wallet which required close to no knowledge to use. AFAIK, they also have a Bitcoin wallet.

All in all, it's a nice post for beginners but I wanted to make sure you don't get these things wrong. I'd advise you to change it a bit so that newbies don't get these things wrong too.

I don't think there are actually that many reputable custodial wallets out there, except for ones linked to exchanges. (Binance, Coinbase, et al.), so i'm not really sure what wallets your'e referring to here.

Blockchain.info/com isn't a custodial wallet.

No... ?

Introduction
Non-custodian wallets are wallets that gives you the full ownership of your bitcoin and other cryptocurrencies as it gives you the private keys of the addresses of cryptocurrencies the wallet can store, it requires no email or any verification, it makes use of your phone, computer or hardware wallet to connect anonymously to the cryptocurrencies blockchains. The transactions of the owner of a particular cryptocurrency like bitcoin is recoded in blockchain using private keys, so, private keys are important. Non-custodian wallet is different from the custodian wallets because wallet providers will be the one to hold your private keys and all you have are cryptocurrencies that are not recorded on the blockchain for you but on the wallet provider wallet. That means on the blockchain, you are not the owner of your cryptocurrencies and that is why it is said that someone has no full control of the custodian wallet.

Non-custodian wallets pros
Ease of use
I read online some months back that custodian wallets are more easier to use and that cryptocurrencies stored can be easily retrived, when I was still new to using cryptocurrencies, I found this useful but later noticed that it is actually not true. I am using three different non-custodian wallets now that are very easy to use. My favorites are coinomi and electrum, they are very easy to use like I said

Supported Cryptocurrencies
For only bitcoin, I use bitcoin core and electrum wallet because they are secure and safe for me, but for saving many cryptocurrencies, there are many non-custodian wallets that support it, example is coinomi, trust and atomic wallet.

Using online wallet as a cold wallet
You can use online wallet as a cold wallet if you have two phones, example is the electrum wallet where you will use one as a watch only wallet and the second where your bitcoin private key is stored offline for signing. Although, aside electeum, i do not know another wallet that has this function.

Security
Non-custodian wallet are more secure which I will still explain below. I also read online that custodian wallet has multifactor authentication, but when I was using coinomi which is non-custodian,  it support BIP39, finger print, pin, pattern and many more. So, I later know that non-custodian wallet support multi factor authentication. Electeum even support 2fa.

Mnemonic phrase
I read that custodian wallet can be easily recovered compare to non-custodian wallets, that they can be easily recovered using email. I did not see this comparison useful at all, non-custodian wallet make use of seed or recovery phrase, all to do is not to just forget the phrase, you should make back-up of it and store it where it can not be accessed by any other person but you.

Private keys
From the introductory part, you know why having your own private keys makes you the owner of individual cryptocurrencies on blockchains, without it, you are not the owner and this means you have no full control over your own wallet on custodian ones.

Hardware wallets
It is highly recommended that bitcoin and other cryptocurrencies worth more than $1000 should not be stored on online wallets, all hardware wallets are non-custodian. I have never seen one custodian hardware wallet before, they are all non-custodian like I said.

Web wallet
The wallet that are most prone to attacks are web wallet, they are all custodian wallets, all the non-custodian I know are mobile, desktop and hardware wallets in which private key are stored on the devices. It must be protected, especially mobile and desktop wallet private keys as it can be hacked through malware by scammers.

Anonymity
Bitcoin and other strong cryptocurrencies  are considered to be anonymous, but custodian wallets will request for emails and other personal details that can be leaked to hackers.

Phishing attack
Even common email revealed to hackers can lead to phishing attack, in which several fake and malware emails can be sent to someone, this malware can reveal about your login details like passwords and others that can be used to stealing cryptocurrencies  from you or to even steal the whole wallet.

Transactions
The transactions of non-custodian wallets are reflected on the blockchain not like custodian wallet that hold the private keys.

Reasons why some chose custodian wallets
Most people that choose custodian wallet is because they did not have enough knowledge about wallets, they just think it is about saving cryptocurrencies, they did not think about other safety reasons non-custodian wallet should be choosing, I know someone that uses custodian wallet and I told him about it disadvantages, he told me he knew but the transactions fee within the network is free and that transaction are easy, so, some people can because of this be using custodian wallet. But to me, non-custodian wallets are easy to use too but require more knowledge, and having these knowledge is more fun than using custodian wallets. I can say custodian wallets are for newbies.

Conclusion
Whales and people that have high amount of bitcoin and other cryptocurrencies  are using hardware wallets and they are all non-custodian wallets, they have the full control of the wallet and their cryptocurrencies  are safest this way. Custodian wallets are easy to use if you have knowledge about them, they are the best, the one I am using uses multi factor authentication and other advance securities like 'reset after certain number of failed login you set' in cash of theft. I like non-ustodian wallets because of anonymity too in a way data leak are not possible.