Digital assets represent systems of money not controlled by any single centralized entity and introduce a principle of ownership that for decades has only been possible with cash. Most modern TradFi entities utilize the custodial model: banks hold money on clients’ behalf and ultimately remain responsible for these funds. Digital assets allow self-custody; investors can retain total autonomy over their funds.
This article examines two of the most popular options for non-custodial wallets with the intent of allowing the investor to select the option most appropriate for them.
Readers can best understand custody as ownership which naturally entails the responsibility of security and the safekeeping of their assets. Many have heard the famous adage, ‘Not Your Keys, Not Your Coins,’ and this expression perfectly expresses the debate surrounding custody: whoever holds the private key owns the assets.
The Current Landscape
The crypto space has witnessed three core catalysts for the move towards self-custody. The Mt Gox hack in 2014, the boom of DeFi in 2020 & 2021, and most recently, the implosion of several centralized exchanges and lending services- the billion-dollar collapse of FTX being the most recent.
On-chain analysis shows that investors continue to withdraw millions of dollars from centralized services due to fears of insolvency. Many are motivated by the hard lesson learned by investors holding funds on the FTX platform. When these companies collapse and declare bankruptcy, whether customers receive their funds largely depends on the company’s user agreement. Users can easily sidestep these issues by self-custodying their assets.
What Is A Non-Custodial Wallet?
Non-custodial wallets put users in charge of their assets, and users become responsible for safeguarding them. There are three critical components of a non-custodial wallet: the private key, the public address, and the seed phrase.
- The Private Key. A randomly generated number used to sign transactions representing the final ownership of digital assets. The private key is the most essential constituent of custody in crypto; if a private key becomes compromised, that user loses ownership of the assets in the wallet associated with that private key.
- The Public Address. This open address can be viewed by anyone and allows users to receive funds.
- The Seed Phrase. A randomly generated string of words that forms a backup mechanism allowing users to recover a lost wallet.
Pro tip: Investors should keep their seed phrase private. Write it down on paper, and keep it in a secure location. Malicious actors routinely search cloud data for photos of seed phrases, so investors should never upload a copy of these words online.
Digital assets live on the blockchain, and the wallet provides the mechanism to access them. Users authenticate ownership with their private key, and a further distinction must be drawn here. Both wallets examined in this article are hot wallets (the private key is stored online), but users can also use cold wallets (the private key is stored offline) to self-custody their assets.
In short, a wallet is a software that allows investors to manage assets living on the blockchain.
Why Investors Should Self-Custody Their Assets
Investors have the option to maintain sovereignty over their assets, something not readily available within TradFi, and investors should leverage this opportunity. Assets stored in non-custodial wallets cannot be seized or censored, and this return to individual rights perfectly embodies the ethos of digital assets. Investors can access both wallets without completing KYC (Know Your Customer), allowing them to maintain anonymity and privacy in an era defined by the erosion of privacy. And most excitingly, they enable users to explore DeFi: the frontier of finance.
The famous fox. A software cryptocurrency wallet available as a browser extension or mobile app launched by blockchain technology company ConsenSys in 2016 and boasts more than thirty million monthly active users. Users can install the MetaMask browser extension in Chrome, Firefox, and Brave.
MetaMask unlocks the decentralized internet by providing a user interface and allows investors to explore the world of DeFi (decentralized finance).
Trust Wallet was launched in November 2017, founded by Viktor Radchenko, and was acquired by Binance in July 2018. Trust Wallet began as a mobile application but recently launched its browser extension in November this year. The application has over twenty-five million users and continues to expand its user base.
Trust Wallet allows users to store, stake, send, and receive digital assets. The ‘automagically’ feature drove early adoption with trust Wallet automatically detecting any tokens associated with the address making crypto more accessible to beginners. Trust Wallet also supports the storage of Bitcoin.
MetaMask vs. Trust Wallet: Comparison
The core functionality of a wallet is to facilitate users to store, send, receive, and utilize digital assets. MetaMask and Trust Wallet both feature fiat on-ramps allowing users to buy crypto with their credit/ debit cards directly through the wallet and both entities support the storage of NFTs. Interestingly MetaMask has recently launched its Bridge Beta, which aggregates data and provides the most efficient route for investors who want to move funds from one chain to another.
MetaMask only supports EVM (Ethereum Virtual Machine) compatible chains, whereas Trust Wallet supports all EVM-compatible chains, the Bitcoin network, and the Solana network. Trust Wallet also allows staking for several assets directly from the application.
Winner: Trust Wallet for beginners, Metamask for intermediates
Both wallets provide high levels of security but remain vulnerable to social engineering and phishing attacks. Neither wallet retains user data, and as they are both non-custodial, the responsibility for storing passwords and seed phrases rests with the user. This departure from TradFi will again be stressed in an era where users have grown accustomed to being able to reset passwords and call customer service to unlock accounts. The security and responsibility rest entirely with the user.
MetaMask can be connected to a cold wallet to facilitate an additional layer of protection.
Since the release of Trust Wallet’s web extension, its integration level has increased tremendously. Both wallets allow users to connect to thousands of decentralized applications, but MetaMask plugs into DeFi way better. And MetaMask certainly comes out ahead, but Trust Wallet seems intent on closing this gap. It is fair to consider MetaMask the ‘base’ wallet for all decentralized applications running on EVM-compatible chains due to its first-mover advantage.
Both applications are completely free to use. MetaMask charges a flat service fee of 0.875% for swaps made within the wallet. Trust Wallet does not charge a service fee, but investors who make swaps have to pay the gas fees, which vary depending on the current utilization of the chain in question.
Fees for buying crypto depend on the third-party provider. Trust Wallet holds a slight edge over MetaMask regarding fees, specifically if users hold the Trust Wallet Token that entitles holders to discounts on crypto purchases and decentralized exchange services.
Winner: Trust Wallet
Neither wallet requires any personal data to download and use: both are decentralized. However, users must take digital hygiene seriously. On top of this, wallets only offer pseudo-anonymity, and the ledger permanently stores a record of every transaction made on the network.
If a user has completed KYC with a centralized exchange and then sends funds to a non-custodial wallet, that wallet address can be linked to them. Additionally, suppose a user connects their DeBank profile with a Twitter address or uses an NFT as an avatar on Twitter. In either case, the wallet can be linked to a specific identity.
Winner: Trust Wallet
Neither wallet is inherently better than the other, and the best wallet for investors will depend on their needs. In very broad generalist terms, MetaMask offers a better experience for users keen to explore DeFi. For users who want to simply self-custody their funds, Trust Wallet presents a slightly better option; its ability to support Bitcoin gives it a slight advantage in this area.
Both wallets allow users to retain full autonomy over their funds and act as gateways to the exciting possibilities and ever-changing landscapes of Web3.