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Differences of Custodial and Non-custodial crypto wallets.
Since everyone that are into crypto currency have their own wallet where they store all of their funds. It will be important for us to know what kind of wallets we are using and what are the complications and benefits of the kind of wallet that we have.
In this article will all about the two kinds of a crypto wallet and their differences.
If there is a Custodial crypto wallet then there is also a Non-custodial crypto wallet. But what are their differences?
When you hold a crypto currency, it store inside of a crypto currency wallet. A digital wallet that allows you to store your funds. You can also send and receive crypto currencies from it. And some crypto currency wallets are accounts that you may have on exchanges like Binance or Coinbase for example. If you want to learn more about the crypto wallet, you can read it here to have a full information about it : Crypto Wallet Explained.
Now at the heart of the crypto currency space is the intention to bring the power back to the people. And that is why innovation in the space have built and continuing to develop what is known as Non-custodial wallets.
To understand the difference let's begin by looking at the Custodial wallet first.
If something is custodial, it literally means that your data or your funds are in the custody or the position of a Third Party. This means that they are responsible for looking of the information that you deposit with them. Binance are great example of this.
When you deposit your money with your bank, they own and have full access to your funds. It means that you have to trust them that they will not run off with your money.
But as always, there are concerns when it comes to trusting Third Parties.
We have heard someone who were not able to withdraw their funds or having their account frozen. You may even have a situation to yourself requiring you to actually call your bank to sort things out.
In some cases, you may even have read stories of Governments seizing funds for a variety of reasons. This is also the most reason example of banks of not behaving as ethically as they should.
Leaked documents shows some of the world's biggest banks allowed criminals to move dirty money around the world.
Even when in crypto, there are concerns with storing your assets in a Custodial wallet like those operated by online exchanges. If the Custodial wallet gets hacked, then there's holding their money that unlikely to lose it.
The Japanese bitcoin exchange MT.GOX is a great example of this.
In 2014 they file for bankruptcy after 850,000 Bitcoins were stolen. As a result, people holding that Bitcoin on this Custodial exchange lost a lot of money.
And the more reason of this is that the crypto currency shades could re-gap. The platform owes 76,000 clients a combined $250,000,000 in assets. Because the assets were used, traded and spent that the clients deposited with them.
And this is where Non-custodial wallets come in.
With Non-custodial wallets like Bitcoin.com, Trust, Trezor, Exodus, Electrum or Metamask, you are in full control of your crypto currencies or your assets. There is no account that were required and you don't need to give any private information and also it doesn't require any authorization of a Third Party to access your funds.
A Non-custodial wallet is like having a digital safe that only you have the combination to. Only you have access to the funds found in your wallet. It means that you are your own bank.
Non-custodial wallet are the best option for those who wants to have full control over their wealth. They do require a higher level of responsibility but the security of your funds rest with you.
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