Cryptocurrency is a term at the peak of its hype. But before you enter the discussion on Blockchain wallets or cryptocurrencies, it is important to learn how to choose the correct wallet for your crypto funds. Cryptocurrency has the potential to become the global currency and hence requires the right storage wallets which can be accessed only with a private key.
The write-up below mentions what does custodial wallet means and what is a noncustodial wallet. Stick to the end of the write-up to find the best possible answer and make the correct choice to store your cryptocurrencies.
Custodial wallets are defined as wallets to store cryptocurrency holdings. In this custodial wallet crypto, a third party holds the private keys to have complete control of users’ funds. You are only allowed to grant permission for sending or receiving the payments. These wallets often lessen your responsibility but seek your trust in the custodian holding funds for you.
Some of the examples of best custodial wallets that can be considered to store your cryptocurrency holdings are as follows
The blockchain wallet grants users the control to be their own bank. Subsequently, only users have the sole control on the private key and there’s no third party involved. This in turn will ensure that your crypto funds are secure. But while using these wallets you must keep in mind to protect all your funds on your own.
Some of the examples of best non custodial wallets that can be considered to store your cryptocurrency holdings are as follows. Go through the list of non custodial wallets and pick the one that fits well within your requirements.
Custodial Vs Non Custodial Wallet
|Custodial Wallet||Non Custodial Wallet|
|Private Key’s Custodian||The Private key is managed by a third party.||The services of blockchain custodian are held by the users.|
|Type of Transaction||The transactions in these wallets are not reflected on chain in the real time.||The transactions in these wallets are reflected on chain in the real time.|
|Security||The sensitive data of user is stored in the form of hot & cold storage. This data is more prone to hacking.||Complete information lies with the users. Risk of loss of data or funds is comparatively lesser as the data stored with the user.|
|Possibility of Backup & Recovery||Since the private key is held by the third party there’s a possibility to recover data as the backup is stored.||However, in non custodial wallets you hold the authority and hence recovery of lost data or funds is nearly impossible.|
|Accessibility Offline||Requires connectivity of the internet as the data is stored with a centralized authority.||Does not require the internet for full time, which signifies they are better alternative for services of blockchain development in real time.|
|Future Scope||More prone to data breach and security concerns.||An edge over the custodial wallets as the users are becoming conscious about privacy and security of their data.|
Below we have answered some of the frequent queries of the individuals dealing with or willing to deal with different types of crypto wallets.
Ques 1. What is a non custodial wallet?
Ans 1. If you store your cryptocurrency in a non custodial wallet it enables you to control your private keys and own them. These wallets allow complete access to your crypto funds. The provider has no access to your private keys and hence none of your funds can be freed or managed by them in any form.
Ques 2: Are non custodial wallets safe?
Ans 2. Yes, the non custodial wallets are completely safe to use and therefore gaining a lot of popularity. The non custodial wallets are considered a safer alternative when compared to the custodial wallets. These wallets enable users to access funds directly and do not require any other third party for managing the funding or performing other related activities.
Also Read: Blockchain Technology
We have explained the advantages and disadvantages of both custodial and non custodial wallets. You can pick the best alternative as per your requirements for your crypto holdings. Some users also prefer using the combination of two. The basic discrimination between the two wallets can be the private key of custodial wallet is held by third-party whereas for non custodial wallet users the key is held by the users.
That’s it from our side. Feel free to ask away your doubts in the comments. Also, for more information and the latest technology guides subscribe to our blog.
December 28, 2021
June 18, 2022