Custodial Wallet Vs. Non-Custodial Wallet: What's your blockchain wallet?

The emergence of cryptocurrency has caused significant changes in the market. This actually mirrors the future exchanges in value. But in order for a person to enter the cryptocurrency world, he/she needs first to secure an e-wallet. Through this kind of wallet, you can store your hard-earned cryptocurrencies. Also, unlike any traditional wallet, e-wallet has features that allow you to send and receive cryptocurrencies in just few clicks away. Cryptocurrency wallet has two types- Custodial and Non-Custodial. Today we are going to talk about them for you to determine what type of wallet you are holding.

Custodial Wallet

Custodial wallet is a wallet where the private keys are stored or held by a third party. The said third party is like a bank which serves as an intermediary, keeping your money under its custody. Due to this, you can only acquire little control over your fund.  You are mostly limited to sending or receiving of payments. This means that you won’t be able to make any transaction with that money without the third party involvement.  Your actions are much restricted in a custodial wallet.

Advantages of Custodial Wallet

• Quick access to fund any time you have internet connection.

• You can never lose your private keys since a third party holds it. This prevents you from the circumstance of losing access to your fund caused by forgotten private keys. With a custodial wallet, it is easy to regain access into your wallet.

Disadvantages of Custodial Wallet

• Vulnerable to data breach which may result to loss of your coins.

• You do not have autonomy over your money.

• Anonymity to conceal personal information is not applicable. You need to provide your identity in order to fully use your wallet.

• Internet connection is a must. You can’t perform any transaction without connecting to the internet.

SOME OF THE BEST CUSTODIAL WALLETS AVAILABLE

Binance

Coinbase

Bitfinex

Non-Custodial Wallet

In non-custodial wallet, you have complete control over your money. It has different types. These are web wallet, hardware wallet, desktop wallet, and mobile light wallet. Whichever type of non-custodial wallet you use, you are provided with the private keys for you to safe keep and no third party can meddle with your transactions.

The private keys provided with these wallets are either:

Mnemonic seed- usually a 12 easy-to-remember words which are stored within the device of the user.

Raw private key- alphanumeric number also stored within the device of the user.

Pros

• Safety against data breach.

• Non-custodial wallet is a much safer option when storing your cryptocurrencies, specifically those hardware type of wallet.

• Instant withdrawals. There is a shorter and faster processing time in using this type of cryptocurrency wallet compared to custodial wallet since your transactions do not need to be confirmed by a third party unlike in a custodial wallet where a third party is involved.

• You have complete control over your money. No third party is needed when performing an activity within the wallet.

Cons

• You may forget your private key

• No backup in case of you lose your private key

Here are some of the best non-custodial wallet out there

Ledger Nano X

Exodus

Atomic

Verdict

When it comes to convenience and accessibility, custodial wallet is more preferable. However, its drawbacks in not having your own private keys and susceptibility to security breach are of great significance for you to consider the other type of wallet. When you want much control over your money, then you should go with a non-custodial wallet. It is important for you to use a non-custodial wallet when storing a large amount of money since it is much safer from security issues.

Thank you for reading. Stay safe guys.

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