Traditional financial institutions, such as banks, act as intermediaries and custodians over their clients’ funds and investments, and they’re also in charge of most of the security measures needed to safeguard your funds and investments from theft. As a consequence, if you have funds or investments in a bank, you do not have direct control over them, but the bank does.
In DeFi and crypto, however, this is NOT the case most of the time. YaspFi and other popular wallets are non-custodial, which means that all of the control over the funds and investments lies solely in the user’s hands. While wallets do provide security and recovery measures, it is up to the user on how to implement them to safeguard the funds. In addition, many wallets, YaspFi included, are open source, which allows anyone with sufficient technical knowledge to verify the security claims of the wallet.
A non-custodial wallet is considered safer because it offers users greater control and security over their cryptocurrency holdings. In a non-custodial wallet, the user retains full ownership of their private keys, which are crucial for accessing and managing their funds. This means that the wallet service provider does not have direct access to the user's funds, reducing the risk of hacks or internal vulnerabilities compromising the assets.
Open source software allows anyone to view its source code. For cryptocurrency wallets like YaspFi, this means anyone to independently verify any of the claims with regard to safety and security. Unlike with more traditional financial apps (e.g. banking), having the code for the crypto wallet or any DeFi app open is the default, which further promotes transparency and accountability to a higher level than traditional finance.
Furthermore, this peer review process helps ensure that the software is robust and reliable by allowing independent review and contributions. A diverse group of contributors can catch and correct errors much faster, leading to more stable and secure products.
When you first set up your crypto or DeFi wallet, you’re usually required to chose a recovery method. Some of the recovery methods include:
Private keys are cryptographic keys that control your funds. Private keys usually correspond to a public key that generates your crypto address that you need to use if you want to receive crypto funds to your wallet.
While it is generally okay to share your public key or your address, you should NEVER share your private key with anyone, as it can be used to gain control over your funds.