After FTX went bankrupt due to liquidity black holes, a series of chain reactions were happening. At present, the biggest concern for investors is to safely store crypto assets. With the growth of the distrust of centralized institutions, once again, decentralized wallets become the best option to regain control of cryptocurrencies. Therefore, what exactly are the differences between centralized and decentralized wallets? Why are decentralized wallets more secure? In this article, BitKeep Academy will explain in detail.
What are centralized wallets and decentralized wallets
Wallets can be divided into centralized and decentralized, depending on whether users are empowered to manage the private key. Decentralized wallets allow users only to manage the private key, while centralized wallets open the right to others.
Centralized wallets: also known as custodial wallets. The private key is not owned by users but in the centralized server of the platform. That is to say, the centralized wallet does not rely on the blockchain network, and all data is obtained from the centralized server on the platform. It is very simple to determine whether you are using centralized wallets: generally, there is no need for backing up the private key or mnemonic phrases for registration.
Centralized wallets are easy-to-operate for users, they do not need to understand complex private key concepts and backup mnemonics phrases. You can retrieve it even if forgetting password. However, since the private key is controlled by the platform, once there is a security problem on the platform, users would suffer huge losses in their assets, and they usually cannot be recovered from the platform.
Decentralized wallets: also known as non-custodial wallets. The private key is kept by users and assets are stored on the blockchain. Users are real holders of cryptocurrency because only they have actual control of their assets. Wallets are just a tool to help them to manage on-chain assets and read data.
Therefore, it is difficult for decentralized wallets to be attacked by hackers. Users do not need to worry about the wallet service provider stealing assets or running away. As long as you keep the private key when creating the wallet, your assets are still on the chain.
Even if changing to other wallets, your assets can still be there after importing the address. Today, decentralized wallets are not only one of the most secure solutions for protecting crypto assets but also infrastructures in Web 3. Taking BitKeep wallet as an example, it supports users to securely access 20,000+ DApps, Swap aggregate transactions, and NFT transactions, plus other rich functions. Its simple operation helps 6.3 million users around the world to provide a convenient entrance to the Web3 world.
Major differences between decentralized wallets and centralized wallets
- Different private key holders
For decentralized wallets, the private key is controlled by users. Assets are recorded on the chain, so users could control their assets. All transactions are carried out on the blockchain and all records can be checked; the transaction process is controlled by codes. Unless 51% of the computing power attacks certain public chains, everything cannot be tampered with.For centralized wallets, the private key is kept by the custodian. You only need to register and log in to your account without understanding concepts and memorizing private keys and mnemonics.
- Different asset control rights
For decentralized wallets, since the private key is controlled by users, the corresponding assets are completely under control. The wallet is a tool to help you manage on-chain and read data, so others can’t control, steal and transfer your assets.For decentralized wallets, the private key is controlled by platforms. Similar to banks, users deposit money there with an account to record funds offered by banks. Banks have absolute control over the users’ funds. Additionally, the transfer of user assets on the chain cannot be viewed, so it is possible for platforms to fraud data.
- Different financial risks
The asset risk of decentralized wallets mainly comes from users’ improper management and losing the private key.The centralized wallet does not rely on the blockchain network, all data is obtained from its centralized server, so it is easily attacked by hackers.Although it is difficult to directly compare the risks of the two, if users strengthen their knowledge of cryptocurrency security and transactions, as well as keep the private key according to certain rules, the probability of the assets in the decentralized wallet being stolen or accidentally lost will be much lower than handing over the private key to a centralized institution.
Why Trust BitKeep?
- The consensus of 6 million global users
Founded in May 2018, BitKeep Global Inc. It’s a reputable brand and the top decentralized multi-chain crypto wallet in Asia. More than 6.3 million users across 168 countries have chosen BitKeep Wallet.BitKeep is the wallet partner of multiple top 30 mainnets (including Polygon, BSC, ETH, Aptos, Heco, OKchain, Tron, Wax, IOST, AVAX, and zkSync). With 76+ mainnets, 20,000+ DApps, 100,000 NFTs and 223,500+ tokens supported, BitKeep is dedicated to creating the world’s largest Web3.0 gateway.
- Continuously enhanced security
In addition to local key storage common in decentralized wallets, BitKeep employs the original Double Encryption Storage Mechanism (DESM) to leverage mnemonic phrases and private keys to provide dual security based on login credentials and transaction passwords. Your BitKeep wallet will remain intact even in the event of a device loss or theft. The security system of BitKeep wallet is thoroughly designed, continuously optimized and iterated, and under 24*7 surveillance for risks and vulnerabilities to ensure timely maintenance.In teams of transaction security, BitKeep has launched a Safety Assurance feature for the users to run a quick and thorough check to detect whether their wallet address has over-authorized DApps or security risks caused by Swap transaction authorization.
- BitKeep Security Reserve
BitKeep sets aside $1,000,000 as the seed fund, and plans to allocate 10% of our monthly revenue to the fund to ensure the continued growth of the available cash pool. The fund is stored in an address on the blockchain that is made public for our users to check it out when they feel like to. BitKeep Security Reserve is designed to cover the loss of user assets caused by BitKeep, which we assume will only happen in extremely rare cases.
BitKeep has set up the “Safety Knowledge” column in BitKeep Academy, to support our users learn about crypto storage, fraud and theft prevention, etc. so that they can eliminate the risk of asset loss and truly control their assets.
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