Custodial and non-custodial Wallets: Definition and Differences

The two kinds of Cryptocurrency wallets that traders in the crypto market are using are Custodial and non-custodial wallets, before a trader purchases any cryptocurrency, he will need a custodial wallet for the transaction, after the purchase, he can move the coin to a safer place like a non-custodial wallet; an offline and personalized environment just to protect his asset.

It is the trader that can decide whether to store his coin in the custodial’s wallet or move it to a non-custodial wallet.

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What does a Custodial wallet mean?

The custodial wallet is a type of wallet that validates a trader’s authenticity to be able to purchase a coin in any exchange. It is issued by the exchange company for buying and selling cryptocurrencies on its platform.

In the process of opening a custodial wallet, a trader is asked to create a username and password, which he can use to access the wallet, however, the wallet is not only limited to the trader, it can also be accessed by the exchange company, the only access the trader has to his wallet is through his password and username.

 All assets in the wallet can be lost if the trader loss his log-in details. Some custodial currencies are Roqqu, Binance, etc.

What are the advantages of a custodial wallet?

  • It can be accessed via the internet.
  • It can be used for buying and selling cryptocurrency
  • It is protected by the exchange company.

What are the disadvantages of a custodial wallet?

  • it can easily be hacked.
  • They are charges attached to transactions.
  • It can only be accessed via the internet.

What is the meaning of a non-custodial wallet?

This type of wallet is more like a decentralized wallet, it is the most secure among the two wallets, this is because the user has total control over his assets.

Unlike a Custodial wallet non-custodial wallet is not needed before buying a cryptocurrency, but it may be needed after purchasing a cryptocurrency, a trader can decide to withdraw the coin from the custodial wallet into a non-custodial wallet for safety.

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A non-custodial wallet can come in two forms; it can be used offline, and it can also need web functioning to be accessed. The best and most secure form is offline hardware.

What are the Differences between a custodial and a non-custodial wallet?

Non-custodial wallet;

  • It has two-way accessibility, that is, an asset stored in the wallet can be accessed both online and offline.
  • It is a personalized wallet.
  • The individual is the only person responsible for securing the wallet.
  • It is protected from hackers.
  • They are no charges

A Custodial wallet;

  • It can only be accessed via the internet.
  • It can also be accessed by the exchange company
  • The exchanger has full control over the security of the digital assets
  •  It is likely to be hacked.
  • They are transaction charges.

To protect cryptocurrency from hackers, crypto traders should give more attention to the type of wallet they intend to use to store their coins after purchase.

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Cryptolifedigital is a cryptocurrency blogger and analyst known for providing insightful analysis and commentary on the ever-changing digital currency landscape. With a keen eye for market trends and a deep understanding of blockchain technology, Cryptolifedigital helps readers navigate the complexities of the crypto world, making informed investment decisions. Whether you're a seasoned investor or just starting out, Cryptolifedigital's analysis offers valuable insights into the world of cryptocurrency.