When it comes to our money, its security should always be at the top of our priorities and we should make sure that we can always have access to it whenever we want.
In this article, I will be tackling the very basic informations about the wallets that every new people in cryptocurrencies must know.
Abouts:
What is a Custodial Wallet?
What is a Non-custodial Wallet?
What are their differences?
What are the advantages and disadvantages?
What is a Custodial Wallet?
From the word itself - CUSTODY.
A custodial wallet is a storing place where both of you and the wallet provider have access. This kind of wallet doesn't have any seed phrase or a private address unlike a Non-custodial wallet (which will be discussed below).
Some examples of a Custodial wallets are Binance, Kucoin, Coins.ph, CEX.io and more cryptocurrency centralized exchanges.
But the best example of a custodial wallet are the Banks.
Let's have an example:
You have an extra amount of money that you think you won't be needing for some time and you wanted to store it in a safe place. Then you have decide to put it in a bank and let it rest there until you need it again.
Since the Bank is a custodial one, the Bank will have a custody over your deposited money. The bank will be the one reliable for the safety of your money and not you.
What is a Non-custodial Wallet?
Unlike the banks or any centralized exchanges like Binance, Non-custodial wallets have a very unique sets of letters and numbers or famously known seed phrase.
The seed phrase will serve as your very own portal to your funds/assets.
From the itself, the wallet provider will not or can't have access to your own wallet unless you give it to them or to someone.
Some examples of a Non-custodial Wallet are Trust Wallet, Metamask, and JUL WALLET.
Here's an example:
You have bought a coin in a central exchange and you are planning to hold that coin for at least 2 years. Since a centralized exchanges is not that reliable for storing a coin for long term, you wanted to transfer to a wallet where you yourself can only access it.
Then a Non-custodial Wallet is a good option for that.
Unless you don't give out your seed phrase to anyone, and you have written and keep it in a safe place, you can have access to it anytime and anywhere you want it.
Which Wallet Is Better?
Both kind of wallet are better in its own way.
With a Custodial Wallet, like Binance, you can feel more secured as Binance now gives out its best security to secure the of its users from any hacks or exploits. And if ever those things will happen, Binance have enough funds to compensate the losses of its users.
While in a Non-custodial Wallet, the only one responsible for its security is you/us. If we have misplaced or didn't write down the seed phrase and announced that you have already lost it, then you will also lost all the funds that you have stored in that wallet.
Remember: The seed phrase is the only key to access your funds. Not the specific wallet.
When you have the seed phrase, you can import it in a different wallet if you ever wanted to. Example, from Trust Wallet to Metamask.
Final Say.
There are lots of non-custodial wallets in the Google Play Store or App store advising that you should keep your money in their wallet.
But for more security reasons, storing it in a known wallet can be easier to access your assets like in Trust Wallet, Metamask or Safepal.
Don't get too caught with new wallets being launched from time to time as it can just be a possible scam or fraud for taking your money.
FIN.
I thought banks are custodial or maybe you mistakenly type it.