Following recent events like FTX’s collapse, crypto users have turned to self-custodial wallets to protect their funds better. These self-custodial wallets give users complete control over their digital assets and peace of mind. However, just like with every other thing else, using custodial wallets has its cons. Thankfully, there is a tool that provides a solution to these key issues. Read on to learn more about self-custodial wallets, the risks involved, and how to solve the issue of non-recovery even with regard to crypto inheritance.
What is a Self-Custodial Wallet?
A self-custodial wallet is a decentralized crypto wallet that gives users absolute control of their private keys and digital assets. Unlike Custodial wallets where the wallet has access to the user’s funds and private key, non-custodial wallets are exclusively owned and accessible by the user.
Self-Custodial Wallets: A Blessing and Maybe A Curse?
Self-Custodial wallets highlight the whole point of web3: decentralization. Users do not need to put their faith in the system or rely on a third party as the security of their funds solely depends on them. That makes self-custodial wallets, in some ways, more secure than custodial wallets.
However, with such benefits comes a heavy responsibility. By opting to use self-custodial wallets, you have chosen to put your funds at your mercy and so, any risky or negligent behavior could lead to you losing your funds. The major part of trusting yourself is how you keep your seed phrase and private keys. A seed phrase, also known as a recovery phrase, is a series of words associated with a cryptocurrency wallet, which gives you access to that particular wallet anytime and anywhere. Meanwhile, private keys are strings of letters and numbers that act as a password and grant you access to your funds on a particular wallet address. In essence, you risk losing all your funds should you misplace your seed phrase. Having exclusive access to your wallet means there is no one to help you restore your wallet.
Risks Associated With Using Self-Custodial Wallets
As highlighted above, using self-custodial wallets has its own risks. While it can be said to be more secure than custodial wallets, there are still concerns that you must address to avoid losing your funds (forever!) One of these concerns is the responsibility of managing and keeping your seed phrase safe. Depending on your behavior and how you handle it, there is the potential risk of a data breach leading to a wallet drain. To be fair, you could also lose these funds even when you are most careful with your seed phrase as there are also circumstances whereby you fall for unlikely mistakes like crypto phishing scams. These phishing scams usually give the attacker access to your wallets even without the recovery phrase.
Crypto inheritance is another risk associated with using self-custodial wallets. A loved one can inherit your crypto assets when you die. However, the fact that crypto is a virtual asset and encrypted makes the whole process almost impossible. It is more daunting, especially when using a custodial wallet that is exclusively accessible to you. Your loved ones can’t guess or imagine what your seed phrase could be.
From the foregoing, it is pretty obvious that the non-recovery of funds is the greatest risk associated with using custodial wallets. Read on to discover how Jinca is providing a crypto recovery service to prevent that from happening.
How Does JINCA Work?
JINCA (Just In Case) provides a crypto recovery service to help users prevent losing their funds forever because of a lost seed phrase. Contrary to what some may think, JINCA doesn’t help users recover their seed phrase. Instead, it provides you with a backup plan in case that happens. Users who sign up on the platform can configure their custodial wallets in a way that allows JINCA to distribute the assets in the wallet to another beneficiary wallet in case they lose their seed phrase or die. Besides assigning the beneficiary wallets, users will also need to stipulate what percentages each wallet should receive. That is mostly effective for crypto inheritance. With this tool, the bequeather can decide who should receive their crypto assets when they die and what percentage each person should receive. That helps to resolve the intricacies involved in bequeathing one’s virtual assets.
Furthermore, users also need to set the alert frequency to determine how frequently JINCA sends notifications to confirm that all is in order – that the user still has their seed phrase and is alive. Where a user fails to reply to the notification, JINCA will send their crypto assets to the provided wallets based on the percentage determined by the user.
Crypto tools like JINCA’s eliminate the cons of using custodial wallets and further strengthen the case for their use instead of custodial wallets.
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