Not your keys, not your coins.

Indeed, the phenomenal collapse of Terra Luna and FTX, among many big players in the cryptocurrency industry out there, have reinforced the importance of self custody of cryptocurrencies. FUD (fear, uncertainty and doubt) spares no entity — even Binance, the world’s largest cryptocurrency exchange, have seen an exodus of funds lately that speaks great volumes of the loss of investors’ confidence in CEXs (centralized exchanges), sparked by concerns over the exchange’s proof of reserves report published last week.

An Introduction To Self Custody

Self custody is the ownership of private keys which give access to cryptocurrency assets existing on the blockchain. Broadly speaking, there are 2 main types of wallets that can store cryptocurrencies — hot and cold wallets. Hot wallets are constantly connected to the internet through your computer or phone, while cold wallets are hardware devices that can keep your private keys offline, bearing the ultimate form of self-custody. Loosely speaking, hot wallets downloaded to a device that is kept isolated from the internet (except for when signing transactions) can be regarded as cold wallets too.

Limitations of Self Custody
While self-custody negates the risks of halted withdrawals and the conundrums of a (dishonest) CEX, you can still lose access to your funds permanently if you lose your device/ wallet recovery phrase. Hence, take the utmost precaution in preserving your recovery phrase, which gives access to your private keys aka ownership of your cryptocurrencies!
Furthermore, it is slightly more difficult (but not impossible!) to grow and compound your assets compared to the one-click experience of earning on a CEX via services such as staking, lending and liquidity mining.

So, How To Earn Passive Income On Crypto Stored On A Cold Wallet?

Did you know that you can store your existing tokens offline and still use them to earn more tokens ? Introducing cold staking, which is literally staking done on a cold wallet! Before delving into the details of cold staking, let us first understand the concept of staking and how it works.

What is staking?

Staking is unique to blockchains that follow the proof-of-stake consensus mechanism, like Ethereum 2.0. By holding coins, users can pledge (stake) their assets to the blockchain to qualify as a validator, and be in turn rewarded with tokens. In simple terms, staking can perhaps be likened to the fixed deposit of traditional finance that pays investors interests on their assets locked in the banks.

Cold Staking

Cold staking combines the best of both worlds of securing your assets in your own custody (as only you have access to the private keys that grant ownership to these assets) and also earning interests from staking at the same time! Cold staking works like normal staking; only your holdings are stored offline in a hardware wallet. When you start staking offline, you will receive rewards for every block you help add to the blockchain. The staked assets never leave your wallet, but are simply delegated to nodes that run the staking service. As such, you maintain complete control over your tokens while staked, and you can even unstake your funds at any time.
While there a plethora of wallets in the cryptocurrency field, few offer the option of native in-app staking . The following are a few noteworthy mentions that offer cold staking, the review of each being preceded by a rating obtained from Trustpilot.

Exodus
Exodus is a user-friendly, secure and convenient cross-platform wallet that offers cold staking at attractive APYs.
Assets available for staking on Exodus

Airgap.it
Airgap.it is a relatively new player in this field, but a rather promising one at it. With AirGap’s two device approach, you can sign transactions completely offline on a device without any network connectivity with the AirGap Vault application and broadcast them with your every-day smartphone with the AirGap Wallet app, bringing security to the next level. You can also take part in staking of various currencies like Tezos, Cosmos or Polkadot and earn rewards while access to your funds is stored securely.
Assets available for staking on Airgap

Guarda
Guarda is a secure multicurrency crypto wallet that offers cold staking.
Assets available for staking on Guarda

MyCointainer
MyCointainer is a staking and masternode crypto platform that helps its users to generate profits in the form of stakes. In additional to the conventional way of custodial staking in which funds are sent into their keeping, MyCointainer also offers cold staking by acting as a validator for staking of assets that are still securely stored on a cold wallet of your choice.

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