As Telegram prepares to roll out Wallet as a native setting on the messenger in November, it’s important to understand why Wallet opted for custody over self-custody.
Wallet, a third-party Telegram bot allowing users to buy and sell cryptocurrencies like Bitcoin (BTC), has chosen custody over self-custody to chase easier onboarding goals, according to a senior executive.
In July 2023, crypto-friendly Telegram messenger announced the integration of the custodial crypto wallet bot known as "Wallet," to allow users to access the bot directly from the messenger’s settings.
Though Telegram has enabled existing Wallet users to see the wallet bot directly in the messenger, those who have never used the bot are still not seeing it in their settings.
According to Wallet chief operating officer Halil Mirakhmed, the full rollout is expected to begin sometime in November, starting with “several African and Latin American countries.” With the rollout, Telegram users in select countries can access the Wallet and start buying, selling and transacting cryptocurrencies.
“The rollout will continue throughout MENA, South East Asia, Central Asia and Eastern Europe,” Mirakhmed told Cointelegraph, adding:
“Once the global rollout has concluded, Wallet will become available in the Telegram settings menu throughout the world, with the exception of the jurisdictions in which Wallet does not operate.”
As noted earlier, the Wallet bot operates a custodial wallet, distinguishing it from major self-custodial wallets such as MetaMask. This means that users entrust their coins to a third party and do not own their assets directly. For example, to withdraw Bitcoin from the Wallet, users must have enough BTC to cover Wallet’s fees, which may sometimes be more expensive than the native fees on the Bitcoin network.
According to Mirakhmed, the Wallet bot platform opted for a custodial solution instead of a self-custodial one for several reasons, including easy onboarding of new users.
“If you want to introduce as many people as possible to crypto, self-custody becomes exceedingly difficult,” Mirakhmed said.
“Imagine if you’ve never used crypto before and your go-to solution for now, let’s say, is a noncustodial wallet on Ether,” he said, stressing that before using a self-custodial wallet, one has to sort out how to store the seed phrase and deal with the wallet, whether it’s a Chrome extension or an app.
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One should also be ready to pay gas fees to transact Ether (ETH), which adds too much complexity to a non-crypto native user, Wallet chief operating officer believes.
In contrast to self-custodial wallets, the Wallet botaims to help users start using crypto the exact moment they click on Wallet on their Telegram settings, Mirakhmed said.
“First of all, the onboarding is very simple. Secondly, you already have a few chains on there. And thirdly, when you want to send someone any assets, you just use a telephone contact. So I can send money to you on Telegram rather than having to know what your address is. It all happens within Telegram.”
When it comes to choosing between custodial and self-custodial wallets, the short of it is that custodial wallets are more convenient but significantly less safe, while self-custodial, or noncustodial, wallets are less convenient but more secure. The biggest issue when using a self-custodial solution is that it’s the user’s sole responsibility to keep the private key, or the seed phrase, safe.
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