Introduction
Non-custodial wallet are important components of decentralized finance ecosystem because they play an important role in promoting decentralization in cryptocurrency spaces they have great impact in cryptocurrency landscape.
Non-custodial wallet are also known as self-hosted wallet or self-custody wallet which are in a digital form that gives its users the opportunity to control assets and complete transaction with their private keys.
Non-custodial wallets is quite different from custodial wallet because custodial wallet has the following features:
Custodial wallets are centralized they are controlled by centralized entity and those are wallet providers and wallet exchange this poses security challenges to custodial wallet they are also vulnerable as hackers can hack them at any time.
Custodial wallet users depend on third party permission before they can perform any form of transaction and this affect the number of transactions they can perform also custodial wallet the man for personal identity for verification and this brings wallet privacy into concern because users have less or no control over their assets.
Custodial wallet also implement know your customer and AML as a regulatory requirement.
Examples of custodial wallets are Binance, Bybit, Freewallet, Bitmex and Bitgo
Features of non-custodial wallet.
Non-custodial wallet are controlled with private keys, users use this private keys for their transactions and control over their wallet, they do not depend on any third party permission before conducting transactions and with the private keys they are not at risk of anyone frozen their account.
Non-custodial wallet at decentralized so users access their wallet anywhere they are at any time as far as they are connected to internet there is no central authority that can stop a user from conducting his or her transaction.
Non-custodial wallet do not experience any global barrier and with this it improves financial inclusivity and encourage individuals to adopt non custodial wallet.
Non-custodial wallet are very much secured once user save private keys either offline or encrypted locally it is very difficult to experience cyber attack and there are so many ways to store private keys it can be in a paper wallet it can be in a digital format it can also be in a hard wallet all this protects non custodial wallet from unauthorized access.
All transactions with non-custodial wallet are carried out on the blockchain so they are immutable and this increases private protection unlike what custodial wallet users experience because they are centralized.
Non-custodial wallet is very vital for decentralized finance applications to function well and regenerate traditional finance services on the blockchain because users can access decentralized finance protocol or decentralized exchange from their non-custodial wallet so users can be able to lend, to borrow and to trade their assets without any obstruction.
Non-custodial wallet enhances network security by distributing nodes and validators in a large quantity and also users who are active can assist in validating transaction which helps to secure the blockchain against hackers.
Example of non custodial wallet are Metamask, Trust Wallet,, Zengo, Edge, Wasabi, Electrum and Phantom.
Challenges facing non-custodial wallet.
Some non-custodial wallet has some complicated steps while setting them up so it requires a deeper knowledge of technology to make use of them which new users might find a difficult to navigate so there is need for improving users experience as well as providing user friendly interfaces that will help to increase adoption.
Secondly if users are not educated on how to secure their private keys if they lose their private keys they can lost their assets also non custodial wallets can experience fishing attack if wallet are not well secured.
Thirdly handling privacy and compliance are the same time is a challenging situation for both wallet developers and service providers, scalability is also another challenge facing non-custodial wallet because blockchain network continues to grow everyday which involves large volume of transactions so handling increase volume of transactions and maintaining decentralization is a challenge.
future outlook of non-custodial wallet.
Non-custodial wallet has a promising feature as the continue to advance the security features in non-custodial wallet because there are still need for more security features like biometric authentication improved key techniques to help protect the wallet some unauthorized attempt.
There is also need to improve the key management process and transaction procedures so that non-technical individual s can enjoy using non-custodial wallet, the issue of interoperability need to be worked on so that users can access their wallet from any blockchain of their choice with different device or laptop.
Privacy focused technology like zero knowledge proof can also be added by developers of the wallet also provide us can also improve when it's comes to regulatory compliance by implementing transaction monitoring and identity verification.
Summary
Non-custodial wallet does a whole lot in cryptocurrency space it goes a long way to empower users to participate in decentralized network also it helps to reduce dependency on centralized wallet.
Non-custodial wallet face no compromise when it comes to integrity of the system despite the challenges known custodial wallet faces it also creates opportunities for inclusive decentralized finance and resiliency.
Non-custodial wallet place a vital role in reshaping the future of worldwide financial system that is why more users are adopting non-custodial wallet solution because the advantage so passes the disadvantage.
Posted Using InLeo Alpha