Non-Custodial Ethereum Wallets
Here, we take a closer look at non-custodial software wallets (hot wallets). Non-custodial means that the owner of the cryptocurrency controls its private keys.
Advantages and Disadvantages
The advantage of a non-custodial wallet is that the user doesn’t need to trust another party to take care of the private key. The user also doesn’t need to rely on a promise that the amount of coins (for example, ETH) really exists.
The downside of a non-custodial wallet is that the user is responsible for keeping the private key secure. This means he has to protect it against loss and unauthorized access.
Types of non-custodial wallets
There are four types of non-custodial wallets:
Browser extensions: These wallets are plugins or extensions for a browser like Firefox, Chrome, or Safari. When visiting a website that wants us to send a transaction, it connects to the wallet plugin. The most popular browser plugin wallet for Ethereum is MetaMask.
Desktop wallets: These wallets are standalone applications for the desktop.
Mobile wallets: These wallets are apps for mobile phones or tablets. Sometimes they have a browser integrated to visit websites. Some of them come with a built-in exchange where users can trade cryptocurrencies.
Hardware wallets: Here, you get a piece of hardware (like a thumb drive) that stores your private key. Whenever you want to sign a transaction, you need to connect the hardware to your computer. The private key never leaves the hardware. This makes it very secure.
In order to set up a wallet, follow the instructions of the wallet of your choice. Most wallets will show you a seed phrase or mnemonic consisting of 12 or 24 words. It is important to store this phrase securely against loss and unauthorized access.
Important! The seed phrase or mnemonic serves as a recovery phrase in case you lose access to your wallet (lost your mobile phone, hard drive broke, forgot password, etc.). However, anybody who learns of this seed phrase can access our funds. So, keep it safe!
