A decentralized wallet is a digital wallet where users control their own mnemonic phrase (private key) and assets without relying on third-party services.
When you store digital assets in a decentralized wallet, where are your assets actually stored? Some people mistakenly believe that storing coins in a wallet means transferring them to the wallet provider. In reality, all coins are stored on the blockchain. The primary functions of a wallet are to generate mnemonic phrases and receiving addresses, and to facilitate interactions with the blockchain. A wallet is simply a tool for managing your blockchain assets. For instance, the balance displayed in your wallet is shown after the wallet reads the balance of your address on the blockchain. Without a wallet, managing blockchain assets would require coding skills.
What should you do if a decentralized wallet provider goes out of business? When using a decentralized wallet, you don't need to worry about the provider stealing or absconding with your assets. As long as you keep your mnemonic phrase safe when creating the wallet, your assets remain on the blockchain. You can switch to another wallet brand and use your mnemonic phrase to recover your assets. The mnemonic phrase is like a seed; as long as you safeguard it, you can restore your assets on any wallet.
What should you do if you lose the mnemonic phrase of your decentralized wallet? When creating an account with a decentralized wallet, you will be prompted to securely and privately back up your mnemonic phrase. Since decentralized wallet servers do not upload or save any user's mnemonic phrases, losing your mnemonic phrase means it cannot be recovered by contacting the wallet provider. The mnemonic phrase (private key) is the only means to control your blockchain assets. If lost, you will not be able to control your assets, recover your wallet account, or transfer assets from your address. Therefore, it is crucial to keep your mnemonic phrase (private key) safe.
What should you do if someone else obtains your mnemonic phrase? If someone else gains access to your mnemonic phrase, they can control your blockchain assets, recover your wallet account, transfer assets from your address, and even change the permissions of your address. In such a situation, you must transfer your assets before the other person does. Once your assets are transferred by someone else, they are essentially unrecoverable.