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This guide introduces you to the concept of blockchain wallets, why Dtravel uses them and how to set one up.
When you deposit money to your bank account, the bank custodies your funds and uses it to make money by giving loans to other people or businesses.
A central entity is useful if you forget your password, but you don’t have full ownership of your funds — you share it with the bank. Despite this, it’s a convenient method for storing funds and generally safe in most stable countries.
Most people trust banks to keep their funds secure, but if a black swan event occurs — such as the Cyprus Bank Disaster in 2013 — your funds may be temporarily inaccessible or, worse, permanently compromised.
When using blockchain technology, you have the option of storing your funds in a custodial wallet or non-custodial wallet. To understand the difference, it’s important to appreciate that blockchain wallets have what’s known as a public key and a private key.
A public key (often referred to as a ‘wallet address’) is like your account number that you share with others to receive funds. For example, an Ethereum wallet address looks like this: 0xb794f5ea0ba39494ce839613fffba74279579268.
A private key (or ‘seed phrase’) is your password to access the funds in a wallet. Anyone who knows your private key can access and use your funds, so you should never share this with anyone. It often appears as a string of 12 or 24 random common words and should be stored in a safe place, ideally offline with multiple backup copies.
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Custodial wallets are similar to bank deposit accounts in that the platform (such as a cryptocurrency exchange) has access to your private key. This simplifies the onboarding process and means you can easily recover your account. However, you rely on the platform to safely store your funds and protect them from hackers.