Custodial vs. Non-Custodial Wallets: Know the Differences

Custodial vs. Non-Custodial Wallets Know the Differences
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Crypto wallets are a necessity for anyone who invests in cryptocurrencies and wants a safe way to store them. But after you invest in any crypto, you must make an important choice between custodial or non-custodial wallets.

Although both of them are great and can keep your coins safe, you will find out that there are key differences that make people prefer one or the other. If you’ve just started purchasing cryptocurrencies and want to know which wallet would be the best, keep reading this post to learn the differences between custodial and non-custodial wallets.

Custodial Wallets – What Are They?

A custodial wallet is a type of wallet that gives your private keys to a third party. This party will hold your keys – therefore, they have complete control over them. You must choose trustworthy wallets. After all, you are letting a third party keep your investments secure and entrust them to return your funds if you wish to send them or trade them.

Non-Custodial Wallets – What Are They?

Non-custodial wallets do not entrust your private keys to a third party, but rather let you have full control of them. So, all of your crypto investments will be in your possession. These wallets are great when you do not trust third parties or don’t want your cryptocurrencies to be held by someone else. It also proves that the funds belong to you.

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What Are the Differences?

The main differences between custodial and non-custodial wallets are:

  • Private Key Holding

As mentioned, custodial wallets require trusting a third party to hold your private keys. With non-custodial wallets, you are the one managing your private key.

  • Safety

When it comes to non-custodial wallets, all of your information stays with you, making it more secure. This way, the data is harder to steal – in fact, it’s almost impossible. The only risk would come from you potentially having your wallet stolen or giving someone else your details.

On the other hand, custodial wallets are riskier. Your information is stored in hot and cold storage. Way too often, the data is stolen by hackers.

  • Transactions

Custodial wallets do not have transactions reflected in real-time on the chain. However, non-custodial wallets do.

  • Accessibility without Internet

To access your custodial wallet, you will generally have to login into it. You require an Internet connection for this, which is not always convenient. Non-custodial wallets let you access your funds offline.

Custodial wallets and non-custodial wallets are different in many ways, from their security to private key maintenance and more. Whether you opt for the non-custodial Binance smart chain wallet or a custodial wallet is up to you and your preferences.

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Which One Is the Best?

The wallet type you should choose solely depends on the features you seek the most in this kind of tool. Generally speaking, non-custodial wallets represent a better option for experienced crypto investors who want to be in control of their funds and access them whenever they want.

Meanwhile, custodial wallets are generally great for beginner investors or those who don’t want to be bothered by the responsibility of keeping their private keys safe.

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