April 19, 2024
Telegram Wallet's Custodial Approach Aims to Simplify Crypto Onboarding
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Telegram Wallet’s Custodial Approach Aims to Simplify Crypto Onboarding

As Telegram prepares to introduce its native Telegram Wallet in November, the decision to opt for a custodial approach over self-custody has raised questions. The Telegram Wallet, a prominent Telegram bot enabling users to trade cryptocurrencies like Bitcoin, has chosen custodianship to streamline the onboarding process, according to a senior executive.

In July 2023, Telegram, known for its crypto-friendly stance, announced the integration of a custodial crypto wallet accessible directly from the messenger’s settings.

While existing Wallet users on Telegram can already access the wallet bot within the messenger, those who haven’t used the bot have yet to see it in their settings.

According to Halil Mirakhmed, the Chief Operating Officer of Telegram Wallet, the full rollout is set to commence in November, initially targeting “several African and Latin American countries.” This rollout will enable Telegram users in select countries to access the Wallet, facilitating the buying, selling, and transacting of cryptocurrencies.

Mirakhmed stated, “The rollout will continue throughout MENA, South East Asia, Central Asia, and Eastern Europe,” adding that once the global rollout is complete, the Wallet will be available in the Telegram settings menu worldwide, except where Wallet operations are restricted.

It’s worth noting that the Telegram Wallet operates as a custodial wallet, distinguishing it from major self-custodial wallets like MetaMask. This means users entrust their coins to a third party and do not have direct ownership of their assets. For example, to withdraw Bitcoin from the Telegram Wallet, users must ensure they have enough BTC to cover Telegram Wallet’s fees, which can sometimes be higher than the native fees on the Bitcoin network.

Mirakhmed explained that the Wallet bot platform chose a custodial solution over a self-custodial one for various reasons, with a primary focus on simplifying the onboarding process for new users.

He highlighted the complexities of self-custody for individuals new to cryptocurrencies, emphasizing the need to store a seed phrase and manage the wallet, whether it’s a Chrome extension or a mobile app. Additionally, users would have to contend with gas fees when transacting Ether (ETH), further complicating the experience for non-crypto-native users.

In contrast to self-custodial wallets, Telegram Wallet aims to make it easy for users to start using cryptocurrencies immediately after clicking on “Wallet” in their Telegram settings.

Mirakhmed elaborated, “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.”

The choice between custodial and self-custodial wallets boils down to convenience versus security. Custodial wallets are more user-friendly but less secure, while self-custodial wallets require more effort to maintain security. The responsibility of safeguarding the private key or seed phrase lies solely with the user when using a self-custodial solution.

Image by freepik

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