Learn the pros, cons, and step-by-step setup of working to control your crypto assets with a self-hosted wallet.
The cryptocurrency landscape is dynamic and characterized by frequent token issuances. While some people are familiar with popular cryptocurrencies such as Bitcoin
Bitcoin
$70,186
Ethereum
$3,583
Sol
$187
Countless tokens are emerging in the ecosystem. Those interested in holding cryptocurrencies have two main options: centralized exchange (CEX) wallets or private (self-hosted) wallets to store them, both of which have advantages and disadvantages.
This article will explain self-hosted wallets and share the basic steps for setting up a beginner Trust wallet to control your crypto assets.
Centralized exchanges Exchange (CEX) holds crypto tokens on behalf of its clients. It follows a standard Web2 arrangement, where users create accounts, buy and sell tokens on exchanges, and rely on the exchange to carefully handle their accounts and the assets they hold. CEX is similar to having a bank or stockbrokerage account, but that’s where some of the similarities end.
The exchange owns the user’s tokens, and in the event of an unfortunate event such as a hack or bankruptcy, the user will have no recourse to these funds. The famous motto “Not your keys, not your coins” exists to encourage direct ownership given the lack of user protection and control over deposits and assets. It is not uncommon for exchanges to fail; therefore, it is prudent to consider this reality and avoid substantial exposure.
However, CEX provides an easily accessible entry point for those new to cryptocurrencies and can be used to purchase tokens for transfer to other wallets. Users can create an account on one of the reputable exchanges in the industry. Most CEXs require know-your-customer (KYC) checks, where users are required to provide proof of identity and, upon approval, can set up their accounts to buy and sell cryptocurrencies. Users must ensure that additional security features, such as two-factor authentication, are enabled to ensure account security.
The blockchain is public in nature, making the tokens owned by any specific wallet address visible to everyone. However, self-hosted wallets are “private” because users individually control access to these tokens.
What is unique about self-hosted wallets is that the user has the mnemonic phrase or private key required to perform any transaction using that address. As long as the user keeps their private keys safe, they are the only ones who have control over the funds in the wallet, i.e. no third party can control or access the funds.
Self-hosted wallets typically start by generating a unique seed phrase for the user's wallet, which the user must then securely store in a safe place. This can be on a piece of paper or any other medium. However, users should avoid keeping them as pure scripts on their computers or mobile devices, as anyone with access to the seed phrase will have complete control over the wallet.
Self-hosted wallets can take many forms, including browser extension wallets (MetaMask), desktop applications (Exodus), mobile applications (Trust Wallet) or Hardware wallet (Ledger). These wallets are typically classified as hot or cold wallets based on their intended use and level of security.
Wallets on a user's browser, desktop or mobile phone are often considered hot wallets because they remain connected to the internet and are more vulnerable to potentially malicious hackers and security threats, while cold wallets (hardware wallets) are typically offline and only connected to the internet when users need to perform transactions or interact. Users who are highly concerned about security often use cold wallets in a one-way interactive manner, where coins are transferred to the wallet for storage, but strictly speaking, the wallet is never connected to any internet-based application.
Some wallets are moving beyond the usual seed phrase mechanism to bring security and simplicity, helping to expand adoption. Some mobile wallets offer features that allow trusted contact recovery, focusing on biometric security to protect assets.
In addition, some hardware wallets pair with mobile apps and utilize chip cards for asset protection, emphasizing the need to protect chip cards like security keys. Additionally, multi-signature wallets require transactions to be approved multiple times, adding a layer of security against unauthorized access and potential fraud.
Trust Wallet supports over 100 blocks chain. Anyone can install Trust Wallet on their mobile device and as a browser extension on their laptop. First, users can visit the Apple App Store or Google Play Store and download the mobile app.
Users can create a new account by following these simple steps:
Step 1: On a mobile device Install the application on.
Step 2: Write your mnemonic phrase securely and secure it during account setup. This is crucial. If a user loses their mnemonic phrase, they will lose access to their wallet and any funds within it.
Step 3: Follow the on-screen instructions to complete setup. Once users complete the backup and verification process, they are directed to the main wallet interface where they can select an initial cryptocurrency for funding.
Users can fund Trust Wallet directly through the app using a credit or debit card, thanks to integration with multiple providers selling cryptocurrencies. If users have a CEX account, they can also transfer cryptocurrencies from the exchange to their Trust wallet.
To use the mobile app To fund a crypto wallet, users must:
Select the token they wish to purchase and Specify quantity.
Select a provider's quote. The app usually highlights the most economical offers.
Users will need to enter their payment details (debit or credit card). Please note that some banks and cards are more user-friendly and allow users to perform cryptocurrency transactions, while others may flag, delay, or block such transactions.
In some cases, providers require users to undergo KYC checks.
Once the transaction is completed, users will see the cryptocurrency credited to their wallet.
The above steps often constitute a so-called "cryptocurrency on-ramp" where users can convert their fiat currency into held cryptocurrency . One of the key principles of the Web3 ethos is decentralization and self-hosting. Therefore, creating a private self-hosted wallet is a pragmatic first step to provide users with wider social and decentralized finance opportunities in the future.
The following sections will cover How to transfer crypto assets from Coinbase and MetaMask wallet to Trust wallet.
First, download and install Trust Wallet, users can then send cryptocurrency from Coinbase to Trust Wallet by following these steps:
Step 1: To transfer crypto assets from Coinbase to Trust Wallet, first press the "Send" button on the Coinbase app or website.
Step 2: Select the specific cryptocurrency and transfer amount, then click "Next".
Step 3: The last step is to enter the receiving address of the Trust Wallet and follow any other prompts provided to confirm the transaction. This process enables digital assets to be moved securely between two wallets.
Step 1: Users wishing to transfer cryptocurrencies from MetaMask to Trust Wallet should first install Trust Wallet.
Step 2: The process involves clicking the "Send" button in the MetaMask wallet, entering the Trust Wallet address and selecting the amount to transfer .
Step 3: User should verify the transaction details before clicking "Send" to complete the transfer. This facilitates the secure exchange of digital assets between the two wallets.
Self-hosted wallets already exist compared to the early days A notable development at a time when users required technical skills to set them up and had to be extremely cautious to avoid losing their passwords. However, mnemonics are only one aspect of a much broader picture. The possibility of losing a wallet due to a misplaced mnemonic phrase or private key, coupled with the lack of a straightforward method of transferring wallet ownership to family and friends, remains a significant barrier to widespread adoption of these wallets by everyday users.
Future self-hosted wallets will ideally not rely solely on mnemonic phrases, but will incorporate biometrics and layers of authentication and approval to easily attract more users and provide peace of mind and security for their digital asset ownership.
On the privacy front, future regulations may require individual wallet addresses to undergo KYC procedures before transactions can be conducted. Therefore, the main purpose of adopting self-hosted wallets is to increase control over users’ crypto assets and gain access to opportunities in the cryptocurrency ecosystem, rather than maintaining anonymity on the blockchain.
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