👋🏻 Hi, OGs!

📈 The life of any Web3.0 user starts with creating a wallet.

In this article, let's look at types of wallets and find out what kind of wallet you need.

🔹 First we need to understand what a Cryptocurrency wallet is. A cryptocurrency wallet is a tool used to interact with the blockchain network. It can be used to send and receive cryptocurrency, as well as access decentralized DApp applications

Wallets are divided into two types:

🛂 A custodial cryptocurrency wallet is a wallet in which private keys are stored and managed by a third party on your behalf. In other words, the owner of a wallet does not have full control over his funds and cannot sign transactions.

✅ Pros:

1. Convenience in registration and use.
2. You can restore your wallet with the support service.
3. The presence of a function in the form of buying cryptocurrency with a card.

❌ Cons:

1. Lack of full control over funds, as you trust the private keys to a third party.
2. Security - keeping funds on a custodial wallet can be risky as you have to rely on the reliability of the provider, which can be hacked or make fraudulent transactions.
3. Centralization - funds are stored with third parties, which is against the principles of Decentralization.
4. Hidden costs - the provider may charge for their services.
5. Closure risk - the provider may change the terms of service or cease operations In both cases, there is a high chance of losing your money.
6. KYC procedure should be completed.

🔗 Non-custodial cryptocurrency wallet - allows users to own and control their private keys. This option is best for those who find it important to manage their funds on their own. Since there are no middlemen involved, non-custodial wallet owners can trade cryptocurrency directly.

A non-custodial wallet is needed to interact with a decentralized exchange - DEX or a decentralized application - DApp. For example, it is needed for the popular decentralized exchanges Uniswap, SushiSwap, PancakeSwap and QuickSwap.

✅ Pros:

1. Absolute ownership of funds. Private keys are exclusively at your control, and no one but you has the ability to manage your wallet.
2. Decentralization - you are not under the control of third parties.
3. Privacy - there is no need to go through KYC

❌ Cons:

1. Liability - full control over private keys obliges the user to securely protect them.
2. Risk of data loss - if you lose your private key, you will lose access to your wallet, and you will most likely not be able to restore it.
3. higher entry threshold - the user needs to have more knowledge about the blockchain and security to avoid losing their funds.
4. Risk of theft - as a rule, non-custodial wallets do not have additional layers of protection such as 2FA.

Wallets are also categorized by type:

• Hot cryptocurrency wallets - wallet are connected to the internet and are available for online transactions. Hot wallets are convenient for daily use and trading because they are quickly accessible. However, this accessibility also means that they are more vulnerable to cyberattacks and hacking.
• Cold cryptocurrency wallets - wallet operate offline and are not connected to the internet. Cold wallets are generally considered safer because they are not susceptible to online threats. They are usually used to store large amounts of cryptocurrency for long periods of time, as they offer a higher level of protection against hackers and hacking.

Note that Account abstraction wallets are now starting to gain popularity. These wallets are safer and easier to use for beginners.

Key differences:

1. The wallet can be created with your email.
2. The wallet is self-custodial, which means you can use a third party (Guardian) if you wish. Thanks to this you can connect 2fa, biometrics, and even recover the wallet in case of data loss.
3. When using wallets with smart contracts (AA-wallet) the possibility of human error is greatly reduced, which increases the overall accuracy of transactions

In the next article we will show you how to create your first non-custodial wallet.

❗️ Remember, no matter what type of wallet you have, you should always use caution and employ strong methods to protect your funds.