Envo Help Center💪 Why you should choose a decentralized wallet to keep your assets?
What are centralized and decentralized wallets?
Wallets can be classified as centralized or decentralized by the characteristic "whether the private key is managed by you only". A decentralized wallet is one in which the private key is managed only by you, otherwise it is a centralized wallet.
Centralized wallet: Also known as a hosted wallet, the private key does not belong to the user, but is in the centralized server of the platform. This means that the centralized wallet does not rely on the blockchain network, and all data is obtained from the centralized server of the platform side. Determining whether you are using a centralized wallet is also simple: there is generally no process of backing up the private key/helper notes during the registration process with a centralized wallet.
Centralized wallets are simple for the average user to operate, without having to understand the complex concept of a private key and without having to back up a mnemonic. Even if you forget your password, you can retrieve it. However, since the private key is controlled by the platform, if there is a security problem on the platform side, the user's assets will also suffer a huge loss and usually cannot be recovered from the platform side.
Decentralized wallets: Also known as non-custodian wallets, the private key is kept in the user's own hands and the assets are stored on the blockchain, the user is the real holder of the cryptocurrency and only the user has the actual control of the assets, the wallet is just a tool to help the user manage the assets on the chain and read the data.
Therefore, decentralized wallets are difficult to be attacked by hackers centrally, and users do not have to worry about self-stealing or running away from the wallet service provider, because as long as you keep your private key well when creating the wallet, your assets are still on the chain and can be displayed after changing the wallet software to import the address as well. Today, decentralized wallets are not only one of the most secure solutions for protecting crypto assets, but also an infrastructure in the Web 3 world. The Envo wallet, for example, supports users to use the wallet to securely access 25,000+ DApps, Swap aggregated transactions and NFT transactions, among other rich features, and its simple operation helps provide a convenient entrance to the Web3 world for 6.3 million users worldwide.
The main differences between decentralized wallets and centralized wallets
Different private key holders In decentralized wallets, the private key is held by the user, and the assets are recorded on the chain, so the user is in control of his own assets. All transactions are carried out on the blockchain, all records are traceable, and the transaction process is controlled by intelligent code, and nothing can be tampered with unless there is a 51% arithmetic attack on a public chain. For centralized wallets, the private key is kept by the custodian, and you only need to register and log in to your account, so you don't need to understand the concepts of memorizing private keys and helper words.
Different control of assets In decentralized wallets, since the private key is in the hands of the user, the corresponding assets are completely under the user's control. The decentralized wallet is just a tool to help you manage the assets on the chain and read the data, so there is no way to control, steal or transfer your assets. As for the centralized wallet, the private key is held by the platform party, just like a bank, the user puts the money in the bank, the bank gives the user an account number to record the user's funds, and the bank has absolute control over the user's funds. In addition, the transfer of user assets in the chain is not viewable, the platform side has the possibility of data forgery.
The risk of funds is different The asset risk of decentralized wallets mainly comes from the user's own mismanagement of the private key of the wallet, the private key is stolen, etc. Centralized wallets are vulnerable to hacking because they do not rely on the blockchain network and all data are obtained from their own centralized servers.
Although it is difficult to directly compare the size of the two risks, if users strengthen their knowledge of cryptocurrency security and transactions and keep their private keys according to certain rules, the chances of assets in a decentralized wallet being stolen or accidentally lost will be much lower than giving the private keys to a centralized institution.