In this article we will talk about self-custodial wallets, its risks and benefits, and your responsibility as an owner of this type of wallet.
What is a self-custodial wallet?
Valora is a self-custodial wallet built on the Celo blockchain. This means that you, as the wallet owner (i.e. Valora account holder), have complete control and access to your wallet. This control is accessible through your Recovery Phrase and PIN. Valora Inc. does not maintain or store this information anywhere and is unable to restore access to any Valora account if a user loses their Recovery Phrase and/or PIN.
Consider the following analogy. Imagine you went into a shop and purchased a physical wallet. After purchasing the wallet, anything you store in it and how you protect it is completely your responsibility. If you lose it or it is stolen, you would not go back to the shop and ask them to return the wallet. Similarly, once you create an account on Valora it is entirely your responsibility to safeguard it by keeping your Recovery Phrase and PIN safe.
Benefits of a self-custodial wallet
For people new to the crypto world, this responsibility may present a challenge to keeping your account secure. However, compared to centralized exchanges or traditional banks, it does have its advantages:
- Self-custodial wallets do not require you to trust a third party, like an exchange.
- There are no costs to creating or maintaining a self-custodial wallet.
- Transactions can be sent globally and are completed within seconds. This also means you can access your funds from anywhere in the world.
- Only you have access to our funds. No one can put limits on your account.
- You maintain control of your privacy.
What happens when I create an account on Valora?
Unlike custodial solutions, which are similar to a traditional bank account or centralized cryptocurrency exchange, when you create an account using Valora you are not creating an account with Valora Inc., cLabs or any other entity. Rather, Valora provides a user interface so you can access and interact with the account (wallet address) you created on the Celo blockchain.
Due to the nature of blockchain technology, any addresses created are unable to be destroyed. If you wish to discontinue using Valora, please contact our support team for instructions on disassociating yourself from your account. However, if you wish to discontinue using Valora but still have access to your address, you are able to access it on any Celo-supported wallet by using your Recovery Phrase.
Anything else I should know?
Because all Valora transactions happen on the Celo blockchain, any and all transactions are irreversible, therefore, users are encouraged to exercise caution when using Celo assets. For tips on transacting safely, check out our Best Practices.
Private Keys vs Recovery Phrases:
It is worth noting that the terms “private key” and “Recovery Phrase,” while related, refer to slightly different things. A private key (which is usually a combination of numbers and/or letters) grants you sole control and ownership over your assets. Private keys are derived from Recovery Phrase (which is a set of words known as a seed phrase or mnemonic code). Therefore, if you control your Recovery Phrase, you will also control your private key and access to your Valora Account.
Additionally, you are encouraged to be mindful of any tax implications, which vary based on your own country.