Decentralized Wallet

Introduction

A decentralized wallet gives users complete control over their digital assets. In other words, only a decentralized wallet’s owner knows the private keys to their wallet address. With a decentralized wallet, users make peer-to-peer crypto transfers and take custody of their cryptocurrencies. That’s why people refer to decentralized crypto wallets as non-custodial, self-custodial, or private wallets.

In contrast, a centralized wallet involves a third-party intermediary. Commonly, these wallets are associated with centralized crypto exchanges (CEXs), such as Coinbase. People with a centralized wallet on a CEX don’t know the private keys for their crypto. Instead, the CEX holds the private keys on its platform. Although traders can transfer their digital currency off a centralized wallet, there’s a risk the CEX can use its authority to bar transactions at any moment. Since the CEX holds custody of the private keys in centralized wallets, they are sometimes called custodial wallets.

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Decentralized wallets are available in two varieties:

Hot wallets: These are software applications that store virtual currency and run on mobile devices or PCs. Because hot wallets are always connected to the internet, they’re more vulnerable to hacks. However, most hot wallets are free to download, so they tend to be the most affordable and accessible option.

Cold wallets: These cryptocurrency wallets store private keys offline, typically in a USB unit. Traders connect their cold wallet device to a computer whenever they want to verify a crypto transaction. Although cold wallets are costlier than most hot wallets, they offer greater protection against cyberattacks.

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What are the Benefits of Decentralized Wallets?

1. The primary benefit of using a decentralized wallet is the control it gives crypto holders. These wallets allow users to store cryptocurrencies without worrying about potential counterparty risks. Since decentralized wallets don’t involve intermediaries, people enjoy greater freedom over their digital asset portfolios.


2. Another benefit of using decentralized wallets is their compatibility with new web-based protocols called decentralized applications (dApps). dApps are similar to other online apps, except they run on decentralized blockchain networks like Ethereum (ETH). Thanks to the decentralization of blockchain technology, dApps promise to increase privacy and introduce innovative use cases in various sectors.


3. To explore the growing dApps ecosystem, people need a compatible decentralized wallet. Since each decentralized wallet has a unique blockchain address, dApps instantly recognize users once they link a crypto wallet to an application.


4. For example, dApps in the decentralized finance (DeFi) space offer access to lending, borrowing, and trading services without centralized authorities. DeCentralFix is a DeFi exchange offering crypto perpetuals trading to eligible users who link a decentralized wallet..

Dozens of dApps in industries––such as entertainment, social media, and video games––exist outside DeFi. Other dApp examples include popular non-fungible token (NFT) markets, such as Rarible, Magic Eden, and OpenSea.

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Where do People Find Decentralized Wallets for Crypto?

As interest in crypto expands, it’s getting easier to download decentralized wallets on mainstream stores such as Google Play and the Apple App Store. If a software wallet isn’t on either of these app shops, there’s a good chance it has a download portal on its official website. Type the name of a preferred crypto wallet into a search engine like Google and find its official URL domain. Many crypto wallets also have official social media feeds on Twitter and Discord that share info on where to download their application. However, be beware of impersonator accounts that may attempt to scam you!

For those interested in cold wallet devices, manufacturers such as Ledger, ShapeShift, and Trezor ship their USB hardware devices to customers. Although secondary sites, such as eBay and Amazon, resell crypto hardware wallets, it may be preferable to order directly from the manufacturer to enjoy insurance protections and reduce the risk of downloading malware. Unfortunately, some hardware wallet resellers download viruses or malicious code into USB drives to target new crypto users.

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A List of Popular Decentralized Crypto Wallets

Everyone has a different choice for the best decentralized wallet, but the following names are viewed as staples in the crypto industry:

1. MetaMask: NYC-based ConsenSys launched the MetaMask desktop wallet in 2016, and it has since become the dominant hot wallet in Ethereum’s ecosystem. In addition to Ethereum, MetaMask works on Ethereum-compatible blockchains, such as the BNB Smart Chain, Polygon, and Avalanche.

2. Trust Wallet: Trust Wallet is one of the most successful mobile wallets. It has more than 60 million downloads on Android and iOS phones. Trust Wallet is a multi-chain wallet that supports over 4.5 million crypto assets on dozens of blockchains.

3. Coinbase Wallet: The Coinbase Wallet is a decentralized hot wallet available as a desktop browser extension and a mobile app. Like Trust Wallet, the Coinbase Wallet supports millions of cryptocurrencies on various blockchains.

4. Ledger devices: Ledger, a French company, is famous for its USB hardware wallets, such as the Ledger Nano S and Ledger Nano X. All of Ledger’s hardware devices integrate with the company’s “Ledger Live” software app, and some dApps and hot wallets work with Ledger devices.

5. Trezor devices: Along with Ledger, Trezor is a dominant name in the USB hardware wallet industry. Trezor opened in 2014 with its classic Trezor Model One wallet and now offers a more advanced Trezor Model T device. The company is a subsidiary of Czech-based SatoshiLabs.

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