Role of Defi Crypto Wallets in Decentralization of Crypto and NFTs

Decentralization is the elimination of the central and intermediary bodies over finance, manufacturing industries, and businesses. Authoritative bodies, such as governments and banks, have controlled mainstream finance for ages, restricting and regulating individual control over their assets. 

As a counter to this centralized model of finance, blockchain technology gave rise to decentralization and empowered individuals to withhold the control of their digital assets and NFTs. Amidst these attempts of decentralization, Bitcoin was the first known cryptocurrency, underlying blockchain technology adopting a payment mechanism that blockchain introduced in 2009. 

In this rise of mass decentralization, the role of DeFi crypto wallets has grown beyond delivering security to your digital assets and crypto coins. In the article ahead we are going to discuss the details of what are crypto wallets and how they are reshaping the decentralized world of crypto and NFTs. 

What are Defi Crypto Wallets?

To many users, it is tedious to keep secure their private keys with which blockchain allows you to access your digital assets. If access to these private keys is lost, there is no other way to gain back your assets. To resolve this major issue, the concept of the decentralized wallet came into existence and became a handy solution for storing private keys. Decentralized wallets are blockchain-based wallets that store the private keys of your crypto tokens and NFTs. 

Private keys are only accessible to the end-owner, unlike public keys that act as the address to your assets and everyone on the blockchain can access. DeFi wallets allow you to back up your private key, safeguarding them from multiple threats. 

Primarily, there are two types of decentralized wallets: hot wallets and cold wallets. Hot wallets are those software wallets that store your private keys in a remote server and can be accessed using your desktop, web, or smartphone. These can be installed from different available app stores without an initial investment. On the other hand, cold wallets are hardware wallets and look like an external hard drive. Cold wallets are tangible and store your crypto private keys within the hardware that you own. You can connect these cold wallets to your desktop and smartphones for seamless transactions. 

Centralized Vs. Decentralized Exchanges

Blockchain exchanges are those marketplaces where a large number of  traders buy and sell their assets. 

Like the traditional banks, centralized crypto exchanges includes a middle man, controlling and regulating the customer's assets. Centralized exchanges also have their wallets that store and protect the customer’s private keys. For this reason, many traders find centralized exchanges more convinient. However, in case of any security comprise within the centralized exchange, ‌you may lose your assets completely as your private keys might also get compromised. Centralized exchanges are the fiat-enabled platforms that allow people to buy cryptocurrency in exchange of their native currency. 

Whereas, decentralized exchanges are free from a regulating middleman and do not store any of the customer’s private keys. Decentralized exchanges are peer-to-peer marketplaces, where the buyer directly connects to the seller and trades as per their convinence. Decentralized exchanges are more secure due to their non-custodial nature. Even if the hackers attack the decentralized exchanges, you will rarely lose any of  your assets as none of your private keys will be compromised. Decentralized exchanges are more efficient, transparent, and secure than centralized exchanges. 

Features of Defi Wallets

Defi wallets are a safe and an easy-to-use platforms for handling your digital assets. If you are planning to buy a wallet, we are providing you with a list of key features which you should keep in mind before finazling your purchase. Getting your hands on a crypto wallet is easy. You can download the hot wallets on your desktop or smartphone using your browser while cold wallets are available on the respective wallet’s websites. We strongly suggest to use the official website of the wallets to buy them.

Non-custodial 

Decentralized wallets are non-custodial in nature which means that no one can regulate and control your asset flow. Users themselves are the owner and custodians of their assets without any active involvement of a third party. Using non-custodian wallets you can buy, sell, send or receive digital assets from any person in the world as all the private keys are stored locally in your device. These transaction will be registered to the blockchain ledger but no one will be able to trace it back to your name but the public address. In DeFi wallets all the transactions are secure with no charges whatsoever. 

Transactional History

Transactional history is one of the key features that has been embedded in the development of Defi wallets. Wallets can maintain a copy of the blockchain records of the transactions that the user has made right from its first transaction on the blockchain. These transaction records are added chronologically as the miners add new transactions to the user's account. One must look out for this key feature in the DeFi wallets before purchasing them.

Compatibility 

Defi wallets come with the compatibility to store multiple tokens including the ones that you own. Defi wallets must have compatibility with the crypto tokens that you want to trade in order to provide diverse options to mitigate the risk involved in trading. Wallets are the core infrastructure to make the blockchain useful and trustworthy and thus the compatibility of the wallets ensures filling the gap between the blockchains. 

Personal Key Generation 

For the secure transaction on the blockchain, what you need is the personal key, public key, and a Defi wallet. A public key is your identity on the blockchain, and blockchains utilized them as records. While private keys are the gateways to access your cryptos and NFTs, being accessible to the individual users only. DeFi wallets allow the users for personal key generation ensuring recovery of private keys and providing less risky storage. 

Decentralization in the NFT world

The abbreviation NFT stands for the Non-Fungible Tokens. Non Fungible tokens, as the name suggests, are unique and non-replaceable or something that can not be interchanged with another entity. NFTs are artworks, games, or something that has a value associated with them. 

The creator sells their creations and designed artworks in a marketplace where buyers are interested in having the ownership of these assets. The decentralization in the NFT world has made this transition happen fast. Now the seller and buyers can connect to a decentralized marketplace directly without a central authority and trade their NFTs must more effectively. Using DeFi exchanges creators can also avoid centralized auctions.

You can get ownership of any created NFT in the virtual world by directly buying from the seller without the involvement of a third party. Even though DeFi exchanges are significant in P2P NFT traders, DeFi wallets are equally essential in storing your NFTs. With DeFi wallets transferring NFTs to the buyer is easy and involves fewer transaction fees. You can send NFTs with the public address of the buyer easily by logging in to your account and selecting the NFTs that you want to send.

Future of Decentralization

Theoretically, the idea of decentralization of the world is fascinating as it grants every individual authority, power, and transparency on their assets. We have noticed how fast the decentralization of the financial systems has happened as it delivers seamless transactional services and complete ownership over the assets to the organizations. Blockchain is also likely to be used in health and wellness centers to maintain transparency between the service provider and the user in the coming future. 

We can see rising demands for blockchain-backed elections since it has revolutionized finance. The transformation of the educational sector is also adapting to this new normal for efficiency and independence in the system. With an inclusive approach, the world is speedily moving towards decentralization in businesses and manufacturing industries. These footsteps are directing countries to revolutionize and encourage citizens to adopt the new normal. Even with all the complications involved in its adoption, blockchain is reaching the core of businesses, and the future is going to be sizeably decentralized. 

Conclusion

The centralized system is more of dependency, trust, and lack of knowledge, whereas decentralization is trustless, efficient, and allows people to educate themselves. We have seen in this article how the NFT marketplaces, education sectors, and medical and health institutes are on a way to decentralizing their core operations. In this secure and peer-to-peer open network, the development of decentralized wallets has been another protective layer for holding assets and private keys for the users. As blockchain technology has already renewed the financial system in many countries like Australia, Canada, the United States, etc. there is a lot that awaits.