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Author Topic: Non-custodial VS custodial wallets  (Read 176 times)
edna67
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August 24, 2019, 07:52:53 PM
 #1

Hi, guys! I recently was said that it's better don't use custodial wallets like coinbase one. What do you think? Is it really dangerous? Do you know any non-custodial wallet we can trust?
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August 24, 2019, 07:55:00 PM
 #2

The point is that non-custodial wallets don't own your keys, so they're more secure. I know Guarda, Coinomi are ok.
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August 24, 2019, 07:56:39 PM
 #3

Try hardware wallets like Ledger..
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August 24, 2019, 08:09:03 PM
 #4

Try hardware wallets like Ledger..

The point is that they cost money and maybe that's why newbies won't buy them.
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August 24, 2019, 08:18:35 PM
Last edit: August 24, 2019, 08:33:29 PM by dkbit98
Merited by CucakRowo (2), OgNasty (1), Quickseller (1), ETFbitcoin (1), LTU_btc (1)
 #5

Hi, guys! I recently was said that it's better don't use custodial wallets like coinbase one. What do you think? Is it really dangerous? Do you know any non-custodial wallet we can trust?

Coinbase can be hacked, resulting in your keys and crypto being lost.


Custodial - you don't have control over private keys - use only temporary and consider it similar as exchange wallet (coinbase, blockchain.info, etc)

Non-Custodial - you have your private keys:

 - Hardware wallets (best): Ledger, Trezor, Safepal...

 - Desktop wallets: Electrum, Coinomi, Exodus, Atomic ...

 - Mobile wallets​: Coinomi, Monarch..

 - Web wallets​: Metamask, MyEtherWallet...

 - Paper wallets


Whatever wallet you choose Remember to always keep backup of your seed words, private key and passphrase.

List of Bitcoin supported wallets with more details you can find here:
https://bitcoin.org/en/choose-your-wallet


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August 24, 2019, 08:56:48 PM
 #6

Hi, guys! I recently was said that it's better don't use custodial wallets like coinbase one. What do you think? Is it really dangerous? Do you know any non-custodial wallet we can trust?

You are hilarious and you're the perfect example of why people shouldn't listen to seriously what pseudo-experts advise most of the time.
In OP you're like asking why it's not so good to use custodial wallets

Here a month ago, you're advising people to not to use custodial wallets
So please in the future, do not recommend something you have no idea about and do not recommend something if you don't know why you recommend it.




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August 24, 2019, 09:04:36 PM
 #7

Hi, guys! I recently was said that it's better don't use custodial wallets like coinbase one. What do you think? Is it really dangerous? Do you know any non-custodial wallet we can trust?

You are hilarious and you're the perfect example of why people shouldn't listen to seriously what pseudo-experts advise most of the time.
In OP you're like asking why it's not so good to use custodial wallets

Here a month ago, you're advising people to not to use custodial wallets
So please in the future, do not recommend something you have no idea about and do not recommend something if you don't know why you recommend it.





 Roll Eyes
I often wonder how genuine most newbies questions are...

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August 25, 2019, 06:29:09 AM
 #8

Try hardware wallets like Ledger..

The point is that they cost money and maybe that's why newbies won't buy them.

There's cost to everything, especially HW wallet which offer good security and convince at same time. It's practically best options for those who've no idea how to secure their wallet.

They just need to verify the HW wallet when they buy it and always verify address/amount before confirm a transaction.

Non-Custodial - you have your private keys:

 - Hardware wallets (best): Ledger, Trezor, Safepal...

 - Desktop wallets: Electrum, Coinomi, Exodus, Atomic ...

 - Mobile wallets​: Coinomi, Monarch..

 - Web wallets​: Metamask, MyEtherWallet...

 - Paper wallets

Take note you still need to trust the developer, especially if the wallet is closed-source

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August 25, 2019, 07:02:05 AM
 #9

Hi, guys! I recently was said that it's better don't use custodial wallets like coinbase one. What do you think? Is it really dangerous? Do you know any non-custodial wallet we can trust?
You should read that thread
Custodial vs. Non Custodial Wallets - "Not your keys, not your coin" Explained.
A bit more information on custodial wallets and risks of hack
Custodial Services
Although often called Bitcoin wallets, services like Coinbase and Circle aren’t true Bitcoin wallets. Customers private keys are held by these third party services, meaning users don’t really have control of their money. As Bitcoiners often say: “if you don’t control the keys, you don’t control the coins”. Mt. Gox is an extreme example, but one that illustrates the importance of holding private keys. Gox was the first and largest Bitcoin exchange up until 2013. Thousands of users stored more than 800,000 bitcoins in their Gox accounts.

At the time, one may have claimed to have 1,000 bitcoins in a Gox account. While true at the time, as soon as Mt. Gox claimed to have been victim of theft users with bitcoins in their accounts were left empty handed. Services like Coinbase and Circle may in fact use good security practices and there’s a chance your bitcoins are safe. But by storing bitcoins with a third party you are always taking on additional risk.
There are many bitcoin wallets, custodial or non-custodial, but if you ask me which wallet I like at most, it is Electrum wallet.
It is important to give you a warning that due to its popularity, there are so many phising sites that attack Electrum.org and its users to steal money from people whom fall into phising sites.
To protect yourself, it is best if you always remember the site address, and type its address manually, and remember to recheck after typing.
https://electrum.org
Quote
Electrum
Electrum may be the most popular desktop wallet, due to its speed and ease of use. Electrum can also be used as cold storage if you have an extra computer that can be used offline. Additonaly, Electrum offers other features like connecting through Tor, multisiganture wallets, integration with hardware wallets, and more.
To avoid phising sites, please read more:
Host-file to deal with phising sites
What to do to avoid phising sites



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Rainbot
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August 25, 2019, 07:52:23 AM
 #10

There is a saying in the crypto industry and almost everyone has heard it: "Not Your Keys, Not Your Bitcoins!"

With Custodial wallets you are relying and trusting another party to give YOU access to YOUR coins when you need them. The other party is keeping the coins for you - like a bank.
With Non-Custodial wallets only you are in possession of the private keys. If you lose them - you lose the coins that are unlocked with those keys.

The whole point of Bitcoin is being in control of your own coins and not relying on third party institutions to handle your finances. With Custodial wallets you aren't really doing that.   

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August 25, 2019, 09:57:10 AM
Merited by suchmoon (4)
 #11

Coinbase can be hacked, resulting in your keys and crypto being lost.

More importantly and humongously more likely, you might be hacked.

If you have coins with a third party you're only a password away from a hack. If you're sensible enough to use 2FA you may only be an email or sim hijack away from a hack.

I think people hear the word 'insured' when it comes to Coinbase and assume they're somehow covered for shit that happens at their end. Of course they ain't.

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August 25, 2019, 02:41:54 PM
 #12

Non-Custodial - you have your private keys:

 - Hardware wallets (best): Ledger, Trezor, Safepal...

 - Desktop wallets: Electrum, Coinomi, Exodus, Atomic ...

 - Mobile wallets​: Coinomi, Monarch..

 - Web wallets​: Metamask, MyEtherWallet...

 - Paper wallets


You are in control of your private keys with most of these wallets, including Trezor, Coinomi, Exodus, Atomic, MyEtherWallet, ..
It is just that some of them are closed source.

Open-source wallets should always be preferred over closed-source ones.

So better choose electrum / wasabi than Exodus for a desktop wallet.
Better choose Mycelium / electrum for a mobile wallet than coinomi.

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August 26, 2019, 12:23:14 AM
 #13




Custodial - you don't have control over private keys - use only temporary and consider it similar as exchange wallet (coinbase, blockchain.info, etc)


Unless something has changed recently, blockchain.info (now known as blockchain.com) is a non-custodial wallet. The private keys are stored in an encrypted format on the server, and are only decrypted on the client side, and you have the ability to store both the encrypted and unencrypted private keys outside of their servers.


Take note you still need to trust the developer, especially if the wallet is closed-source
If the wallet is open-source, you are also trusting the developer if you do not know how to inspect the code. There have been open source wallets and software that can reasonably be described as malware.
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August 26, 2019, 02:24:00 AM
 #14

Unless something has changed recently, blockchain.info (now known as blockchain.com) is a non-custodial wallet. The private keys are stored in an encrypted format on the server, and are only decrypted on the client side, and you have the ability to store both the encrypted and unencrypted private keys outside of their servers.

Could you really consider it truly non-custodial if they also have a copy of your keys? Sure they encrypt it, but even for fully non-custodial wallets like Electrum, it's not recommended to store your keys online, encrypted or otherwise. Either way, if you're looking for non-custodial wallets, blockchain.com should be at or near the bottom of your list.

If the wallet is open-source, you are also trusting the developer if you do not know how to inspect the code. There have been open source wallets and software that can reasonably be described as malware.

True, but I would argue that closed-source code is more likely to be dangerous than open-source ones provided it isn't obscure; popularity leads to scrutiny, which is much easier to apply on open source projects. It's better to stick to open-source projects in most cases.

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August 26, 2019, 03:29:21 AM
 #15

Unless something has changed recently, blockchain.info (now known as blockchain.com) is a non-custodial wallet. The private keys are stored in an encrypted format on the server, and are only decrypted on the client side, and you have the ability to store both the encrypted and unencrypted private keys outside of their servers.

Could you really consider it truly non-custodial if they also have a copy of your keys? Sure they encrypt it, but even for fully non-custodial wallets like Electrum, it's not recommended to store your keys online, encrypted or otherwise. Either way, if you're looking for non-custodial wallets, blockchain.com should be at or near the bottom of your list.
The blockchain.com wallet does not meet the criteria of a custodial wallet. They have safeguards in place to prevent those who don't own the wallet to even attempt to decrypt the private keys. One may argue that using the blockchain.com wallet means that you are using poor security measures.
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August 26, 2019, 05:02:09 PM
 #16

If the wallet is open-source, you are also trusting the developer if you do not know how to inspect the code. There have been open source wallets and software that can reasonably be described as malware.

Actually, it is the other way around.

With closed-source wallets, you have to trust the developer.
With open-source wallets you just have to trust the code. If you can not (or don't want to) verify it yourself, check whether other trustworthy people have reviewed it.
The more popular a software is, the more people have looked at it.

While there definitely have been open-source projects which basically were malware, these were non-popular projects. Not comparable with electrum, for example.

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August 26, 2019, 05:27:59 PM
 #17

Unless something has changed recently, blockchain.info (now known as blockchain.com) is a non-custodial wallet. The private keys are stored in an encrypted format on the server, and are only decrypted on the client side, and you have the ability to store both the encrypted and unencrypted private keys outside of their servers.

Could you really consider it truly non-custodial if they also have a copy of your keys? Sure they encrypt it, but even for fully non-custodial wallets like Electrum, it's not recommended to store your keys online, encrypted or otherwise. Either way, if you're looking for non-custodial wallets, blockchain.com should be at or near the bottom of your list.
The blockchain.com wallet does not meet the criteria of a custodial wallet. They have safeguards in place to prevent those who don't own the wallet to even attempt to decrypt the private keys. One may argue that using the blockchain.com wallet means that you are using poor security measures.
What do you mean by that exactly? Can't you just import your blockchain.com seed into electrum? Pretty sure that would generate the right private keys.

- I do agree - Blockchain.com only has to change a tiny bit of JS and they'll probably be able to steal all your BTC. not to mention that their wallet doesn't support segwit, rbf, etc.

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