Everything You Need To Know About Choosing A Secure DeFi Wallet
| Here is a guide for Choosing a Secure Defi Wallet |
Decentralized Finance (DeFi) is without a doubt the future of global finance given the impressive growth trajectory that it has notched in the last few years. For investors to navigate through DeFi, they will need to arm themselves with some prerequisites like the choice of a secure DeFi wallet, and a protocol amongst others.
This article will concern itself with the features of a secure DeFi wallet that investors need to keep an eye on in order to get the most out of the ecosystem. Without further ado, let’s jump right in!
What Is DeFi?
Decentralized Finance is a broad term for all the peer-to-peer financial services that are carried out on the blockchain or through decentralized ledger technology (DLT). DeFi allows participants to interact with the financial services of lending, borrowing, trading, and investing to earn yield without the need for third parties unlike the type offered by traditional financial services.
DeFi works by combining the ethos of blockchain technology which are decentralization and being trustless. Through decentralization, participants are in total control of their assets without the permission of an intermediary.
The transactions are confirmed by other users through the use of computer power (Proof-of-Work) or through staked tokens of other users called Proof-of-Stake. All these transactions are stored on the blockchain which gives it a reputation of transparency.
DeFi has a broad range of utilities including being deployed by decentralized exchange, settlement of transactions, peer-to-peer borrowing and borrowing from liquidity pools, flash loans, yield farming, and prediction markets.
DeFi Wallet
Having obtained a rudimentary understanding of DeFi, we can now proceed to the factors that influence the choice of choosing a secure DeFi wallet. The choice of a DeFi wallet is one of the weightiest decisions that an investor can make as it is often likened to the choice of choosing a bank in traditional finance.
This is because DeFi assets are stored in a DeFi wallet and their decentralized nature gives the owner absolute control over them. Their non-custodial nature places a burden on the owner to bear full responsibility for the safety of assets in the wallet.
Therefore, extra caution should be taken before making the choice of a DeFi wallet. The accessibility, compatibility, security, ease of use, and functionality of the wallets are some of the features that investors should keep an eye on before making the choice.
Compatibility
DeFi wallets must be compatible with the DeFi protocol of your choice and web browser. The choice of a web browser is important because interaction with DeFi takes place on web 3.0 applications which some web browsers do not have compatibility with.
As a way around this, mobile wallets are being integrated with browsers that can interact with web 3.0 without the need to leave the application. The bottom line is to identify a DeFi wallet that is compatible with your web browser and the DeFi protocol of your choice.
Non-Custodial
Before making the choice of a DeFi wallet, users should check whether the private keys of the wallet are held by a third party or not. The ideal DeFi wallet should be non-custodial in nature meaning that the user has sole control over the private keys and they are not entrusted to the hands of a third party.
Typically, transactions using a non-custodial wallet are reflected on the blockchain in real-time with no delay while custodial wallets might experience a bit of lag before the details of the transaction reflect on the public ledger. It is important to note that recovering data or private keys is an impossibility with non-custodial wallets.
Multi-chain Support
The cryptocurrency ecosystem is growing with a plethora of blockchains and projects offering investors a wide range of options. As investors chase staking opportunities and yields from one blockchain to another, choosing a DeFi wallet that supports multiple blockchains is a plus.
The choice of a versatile DeFi wallet is important because it reduces the need for investors to download new wallets every time they want to interact with another blockchain.
Security
The security of a DeFi wallet is paramount before making the choice. Users should check whether or not the wallet is either custodial or non-custodial with the latter offering a stronger layer of security. Generally, secure DeFi wallets are open-source and allow users to view the code behind the wallet to spot bugs that might be exploited by bad actors.
Some DeFi wallets offer the option for multiple users to confirm the same transactions known as “multi-signature transactions” while others provide the functionality for users to nominate people to assist in the recovery of their private keys. The history of security breaches on the wallet should be taken into account and users should generally avoid DeFi wallets with a long history of security breaches.
Social Presence
The social presence of a DeFi wallet is often overlooked by investors when making their decision. However, this factor can shed significant light on the features and overall worthiness of the DeFi wallet. A good DeFi wallet is one that has an active social media presence and a healthy level of engagement.
Through its social media handles, the DeFi wallet allows users to keep up to date with the latest developments on the platform. Security tips are shared on social media handles and users are given a heads up if there is any security breach on the platform.
The social accounts of the founders are also another lesser-known metric that might shed more light for investors to make their choice for a DeFi wallet. Wallets with a reputable team are often preferred over wallets that operate with an obscure team. The number of users of the DeFi wallet is often an indicator as wallets with a large user base are generally preferred over those with small numbers.
Convenience
DeFi as a budding sector is plagued with the challenge of being complex to a mainstream audience. Therefore, the ideal DeFi wallet is one that combines functionality with convenience.
Users should pay attention to the ease of use of a DeFi wallet so that a beginner can be able to navigate through the platform with relative ease. An intuitive user interface is necessary to smoothen out the process and investors should pay attention to whether or not the DeFi wallet offers a step-by-step guide to bring investors up to speed.
Other Features
With the basics of security and compatibility covered, potential investors can now proceed to make their decision on the other features offered by the DeFi wallet. Some DeFi wallets may allow investors a chance to stake and earn yield while others may only offer the basic features like the opportunity to only transact and store assets.
Some DeFi wallets might not allow you to visualize the Non-fungible tokens (NFTs) in your holdings while others might allow users the opportunity. The integration of the wallet with DeFi apps is an added functionality for users as it dispenses the need to leave the wallet when interacting with other protocols.
The Best DeFi Wallets On The Market
Considering the features listed above, here are some of the leading DeFi wallets in the space available for investors.
CoinStats Wallet
The CoinStats Wallet comes packed to the brim with a ton of features that make it one of the leading DeFi wallets on the market. The Wallet allows users to track and manage all their crypto and DeFi holdings from one location while still earning rewards on the wallet.
Users of the wallet can buy cryptocurrencies directly on the platform using either credit or debit cards or a bank transfer. Users can interact with a wide pool of DApps while security risks are mitigated through the use of biometric security and the use of a 12-seed phrase.
MetaMask
MetaMask is one of the leading DeFi wallets and makes the list because it allows users to interact with DeFi using any web browser. Users can easily install the Metamask extension on their PCs and have access to both ERC20 and BEP20 tokens and also that of layer-2 chains like Polygon.
MetaMask’s ease of use and social presence is an added bonus for the exchange as it regularly offers security warnings to followers on its social media handles.
Coinbase Wallet
In DeFi, the Coinbase Wallet is carving a name for itself given the interesting offering that it offers. The wallet supports a large number of tokens and has a superb user interface. To send payments, users can simply input the username of the other party of a transaction to send payments instead of typing out a hexadecimal code that could be prone to mistakes.
Other noteworthy wallets include Argent, Trust Wallet, Gnosis, and Brave Wallet among others.
Conclusion
It’s often easy to be lost in the sea of DeFi wallets but with a proper understanding of the basic features that a DeFi wallet should have, navigating through the maze should be straightforward.
Investors should prioritize the security, compatibility, convenience, social strength, and whether a DeFi wallet has multi-chain compatibility. So there you have it! Everything that you would need to know about the choice of a secure DeFi exchange to make the most out of DeFi in 2022.
Read: 4 Common Cryptocurrency Investment Mistakes and How to Avoid Them
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