Binance’s Web3 Wallet: a Self-Custody Wallet
Main Takeaways
Binance’s Web3 Wallet is a self-custody wallet where users have ultimate ownership of their assets and private keys. This contrasts with custodial wallets where a third party has control, and the user has to trust that centralized service.
The Binance Web3 Wallet uses MPC tech, dividing access into three key shares stored in different locations, and providing robust security without the traditional seed phrase. The wallet cannot be accessed with a single key-share. Two are always held by the user.
To emphasize user control and a commitment to self-custody, the Binance Web3 Wallet also offers an “Emergency Export” function allowing users to export their private keys.
Binance's Web3 Wallet offers a revolutionary approach to self-custody, blending multi-party computation technology with user empowerment, ensuring true ownership of crypto assets.
When it comes to managing your crypto assets, the type of wallet you choose plays a crucial role in ensuring the safety of your funds. Among the various options available, the concept of self-custody wallets stands out due to the fact they give users complete control over their own assets. Still new to all this? Let’s break down the difference between self-custody and custodial services as your starting point.
Understanding Crypto Wallets and Private Keys
Self-Custody (Non-Custodial) Wallet: In a self-custody wallet, the user has possession of the private keys and thus total control over the funds. The user is fully responsible for managing and keeping their keys secure. If the keys get lost or stolen, they cannot be recovered by anyone else, and the funds would be irretrievably lost.
Custodial Wallet: In a custodial wallet, a third party (like a cryptocurrency exchange or a managed wallet service) has control of the private keys. This means they’re in control of the funds stored in the wallet. Users rely on the service provider to secure funds and may be able to recover funds if access data such as passwords are lost. However, the downside is that their funds can be frozen or stolen if the third party is hacked, goes out of business, or if they choose to freeze your assets for whatever reason.
Private Keys: Both of the above explanations assume you know what a private key is. In crypto, a private key is a secret, alphanumeric password used to spend or send your digital assets to another address. It’s this unique and secret key that gives you access to your crypto, just like how a physical key allows you to unlock and access your home.
Having a private key is essentially what defines your ownership over your digital coins. If someone else has your private key, they can easily transfer your coins without your consent. Hence, it’s critical to keep your private keys secure and confidential.
Private keys are long, complex, and hard to memorize, and if you lose them, you lose access to your digital assets permanently. Generally, wallets don’t provide direct access to private keys for security reasons. Instead, they provide you with a “seed phrase” — a set list of 12-24 words that work as a recoverable and human-readable backup to restore and protect your private keys for accessing your cryptocurrencies.
Binance Web3 Wallet: Embracing Self-Custody
With Binance Web3 Wallet, you're the true owner of your assets. It empowers you with a self-custody model, ensuring only you have exclusive access to your funds, and are fully in control of your assets. One of the most important things to realize about the Binance Web3 Wallet is that it utilizes multi-party computation (MPC) technology. Put simply, this means you can enjoy a self-custody wallet experience without the need for remembering a seed phrase, but still have full, unrestricted control of your own assets.
How does this tech work? Dive into our MPC blog for more. But in terms of self-custody the thing to remember is that Binance Web3 Wallet is secured by three key-shares and a recovery password solely known to the user. These key-shares are generated when you create the wallet and stored in different locations for added security:
Share 1: Secured by Binance;
Share 2: Stored on your device;
Share 3: Encrypted by the recovery password you entered, and backed up to your personal cloud storage (iCloud or Google Drive).
To access your Web3 Wallet, you must have at least two wallet key-shares. Binance only holds one key-share. There is absolutely no way for Binance to access your wallet without you. But what it does mean is that if you lose your device (and the key share on it), you can restore your Web3 Wallet and its assets thanks to the key share backed up to your personal cloud storage combined with the key share secured by Binance.
However, please note that you, and only you, have access to two of the three key shares, and so are also ultimately responsible for safeguarding your wallet’s assets and access. If you forget your recovery password/lose access to your cloud storage AND lose your device/delete the Binance app, you won’t be able to access your Web3 Wallet and Binance will not be able to restore it for you. There’s no centralized service here that can reset your password or recover any key shares you were looking after. This is a self-custody wallet!
Exporting Your Keys: A Testament to Self-Custody
A quintessential hallmark of self-custody is the ability to export one’s private keys. With Binance Web3 Wallet, users are not only in full control of their assets, but also have the option to export their private keys should they wish to migrate elsewhere.
Traditional wallets often rely on seed phrases — mnemonic phrases designed to restore access to all of a user’s keys. In contrast, the Binance Web3 Wallet utilizes Multi-Party Computation (MPC) to foster enhanced security. In this setup, private key-shares are split and stored across locations, negating the need for a seed phrase.
Enter the “Emergency Export” function. This feature is designed to provide users with a way to immediately export their private keys should they wish, and for any reason. It’s a testament to Binance’s commitment that Web3 Wallet users always retain control.
However, please note that once the “Emergency Export” function is activated and private keys are exported, the Web3 Wallet becomes inaccessible. It’s a definitive move — a nod to the wallet’s unwavering dedication to the ethos of self-custody.
Addressing concerns over app access
We recognise that as the Web3 Wallet is intertwined with the Binance app’s user interface (UI), some users may worry that in unprecedented scenarios where access to the Binance app might be obstructed, the inability to then interact with the UI, and by extension their Web3 Wallet, could effectively render their self-custody void.
As a result, we’re currently working on ensuring the “Emergency Export” function will always be available — independent of the Binance app’s status. At the core of self-custody lies one undeniable truth: the possession of private keys, and that’s what we’re committed to always delivering on for Binance Web3 Wallet users.
Final Thoughts
The concept of self-custody, as illustrated by Binance’s Web3 Wallet, represents the very essence of blockchain and crypto ideals — absolute control and ownership of your own assets. Recognising the importance of private keys, and the crucial role they play in securing digital assets, Binance’s Web3 Wallet offers a unique and innovative approach to self-custody through the use of multi-party computation (MPC) tech.
The incorporation of features such as the “Emergency Export” function underpins Binance’s commitment to user autonomy and control. While it’s important to recognize the inherent responsibilities that come with managing your own assets, Binance is taking steps to address potential concerns and streamline the entire user experience.
This combination of innovation, security, and user empowerment marks a significant step forward in the evolution of cryptocurrency wallets. Web3 is easier with Binance.
Further Reading
Disclaimer: Binance Web3 Wallet is an optional product. It is your responsibility to determine if this product is suitable for you. Binance is not responsible for your access or use of third-party applications (including functionality embedded within the Binance Web3 Wallet) and shall have no liability whatsoever in connection with your use of such third-party applications, including, without limitation, any transactions you dispute. Please carefully review the Binance Web3 Wallet Terms of Use and always do your own research.