How to Self-Custody Crypto

If you're thinking about withdrawing your crypto from an exchange like Coinbase, Kraken or Binance, it's crucial to understand the value and process of self-custodying with a wallet like Fire. Let's explore how you can start this journey.

1. What is crypto self-custody?

At its core, self-custodying your crypto means one thing: owning your private keys. No exchange can freeze your assets, nobody can seize them. 

In older wallets, these are stored in a phrase of 12 words (called a seed phrase) which give access to your wallet. More modern wallets use a technology called MPC (multi-party computation), which makes unlocking your wallet easier and removes single points of failure.

But once you self-custody, you can explore everything web3 has to offer that exchanges don’t enable: Buying NFTs, earning DeFi yields, trading tokens, interacting with smart contracts… you name it!

2. Selecting the right wallet

Once you’ve decided to self-custody your crypto, you need to choose the right web3 wallet. Choosing the right wallet is an integral part of the self-custody process. There are 2 core types of wallets available, each with its own advantages:

• Hardware wallets: These are physical devices (like the Ledger Nano S or Trezor) that store your private keys offline, making them resistant to online hacking attempts. They are best for long-term storage and large amounts of crypto.
• Software wallets: These are apps or programs you can install on your computer or smartphone. We recommend using the safe and easy-to-use Fire Wallet, but there are other examples like MyEtherWallet. They provide quick access to your funds but ensure your device is secure.

To find out more about choosing the right wallet, read our hot wallet vs. cold wallet article.

3. Using/holding your crypto as you want

Once you've moved to self-custody, a world of options opens up:

• Hold and store: The most straightforward option is to simply hold your crypto.
• Participate in DeFi: With your crypto in a wallet, you can engage in the decentralized finance (DeFi) ecosystem, lending your assets or earning interest.
• Staking: Most cryptocurrencies except for Bitcoin, Dogecoin and Litecoin allow you to lock up a portion of your holdings to earn rewards.
• Transactions: Send or receive crypto with anyone, anywhere in the world without relying on intermediaries.
• Switch networks: With an Ethereum wallet, you can access dApps (decentralized applications) on any network in the EVM ecosystem, including cheaper and faster layer 2s.