Topic: what and which are custodial and non custodial wallets. (Read 313 times)
It's like this: a non-custodial wallet is like having your own key to your house, you have control. You can keep your private key, which is like the key to your crypto assets. It's in your hands, so you're in charge and responsible. On the other hand, a custodial wallet is more like a bank where they hold your key. You don't have that direct control; someone else does. So, if you prefer having your own key, go for non-custodial. It's like holding the reins of your financial house, giving you autonomy and ownership in the crypto world.
Generally we understand a wallet as a thing that stores all the savings of our daily life. By my question everyone will understand what I mean, what and which are custodial and non custodial wallets.
Its just a difference between the wallets that one you can control and it isnt. Custodial are more likely exchange wallets and some private company with wallet features and non custodial are the one you hold your own keys which no one cant access too. Best exmaple of these are metamask, rabbit and many more. People tends to use that for a safer storage. 
A noncustodial wallet is the opposite, it is an open source and only you have your keys, you are your own bank and you are in charge of the security of your wallet.
Not all non-custodial wallets are open source!It is best if you choose a non-custodial, open source wallet to store your bitcoin or cryptocurrencies but as I am correcting you, not all non custodial wallets are open source.
Examples of non custodial wallets, but not open source wallets are
Atomic wallet
Exodus wallet
Everyone needs to use different types of wallets to work with cryptocurrencies. Wallets are definitely needed to work in crypto. Generally we understand a wallet as a thing that stores all the savings of our daily life. By my question everyone will understand what I mean, what and which are custodial and non custodial wallets.
Just as the word implies; custodial and non custodial wallets; the two are both wallets but have opposite functions.In custodial wallets, the company or third party that own the wallets control your Bitcoin, while
In Non custodial wallets, you are your own bank, you own and control your wallet security (private key) which means you are the person controlling your bitcoin.
Advisably, for security and privacy, use an open source non custodial wallets to keep your bitcoin safe.
Custodial wallet is from a closed source where you are not allowed to control your own keys yourself but a third party controls it for you. Let me say that it is centralized. In a custodial wallet you are vulnerable to attack.
A noncustodial wallet is the opposite, it is an open source and only you have your keys, you are your own bank and you are in charge of the security of your wallet.
It is advisable to use a noncustodial wallet for proper security of your assets and for you to have full possession of your coins. The most safe noncustodial wallet is a hardware wallet because it is air gap and that is why a cold storage wallet is also safe because you need to generate the keys on an air gap device and never connect it to the internet.
A noncustodial wallet is the opposite, it is an open source and only you have your keys, you are your own bank and you are in charge of the security of your wallet.
It is advisable to use a noncustodial wallet for proper security of your assets and for you to have full possession of your coins. The most safe noncustodial wallet is a hardware wallet because it is air gap and that is why a cold storage wallet is also safe because you need to generate the keys on an air gap device and never connect it to the internet.
Everyone needs to use different types of wallets to work with cryptocurrencies. Wallets are definitely needed to work in crypto. Generally we understand a wallet as a thing that stores all the savings of our daily life. By my question everyone will understand what I mean, what and which are custodial and non custodial wallets.
There are two types of wallets, custodial wallet and non-custodial wallet. Whenever you register yourself on a centralized exchange such as Binance, Bybit and buy any currency from there, it is called a custodial wallet, and when you buy cryptocurrency through Metamask or Trust wallet, it is called non-custodial wallet.
In a custodial wallet you are only given a key, through which you can access your funds, but you do not own the funds, as they are controlled by someone else. Whereas in a non-custodial wallet you are given the private keys, where you are the full owner of your fund, and the fund is at your disposal. However, even in a non-custodial wallet, you should always keep your private keys offline, to protect your funds from being stolen by hackers, because your private keys are like bank account numbers.
Everyone needs to use different types of wallets to work with cryptocurrencies. Wallets are definitely needed to work in crypto. Generally we understand a wallet as a thing that stores all the savings of our daily life. By my question everyone will understand what I mean, what and which are custodial and non custodial wallets.
Let me put it this way:
From the word Custody: temporarily possession
custodial wallets
This means a third party has a temporarily possession of your assets in which you could perform transactions at your convenient time but have to pass through the third party confirmation before transaction of funds
Non Custodial wallets
self custody : no possession of third party
This means users have full control over their assets and are responsible for any action taken on such wallet either positive or negative.
Unlike custodial users Don need any confirmation from third party to perform transactions.
Costodial wallet are wallet controlled by some Crypto exchange, which have total access of the coin sent to it, and the private key is held by the Crypto exchange which is also called (CEX) Centralized Exchange.
Costodial wallet, the name means I have to pay cost to have costodial wallet?Your post contains wrong information too. If you open your account on one exchange and use a public address to receive (deposit) your coins into that account, you don't control private keys, mnemonic seed of that wallet.
That specific exchange controls it, not some crypto exchanges (like you write). Each exchange control their customer wallets' private keys/ mnemonic seed and other exchanges can not control it, users can not control it too.
Custodial
> Third-party (exchanges/service provider) private key control
- the user does not have direct control over private keys
> Less secure
- willing to trust a third party to manage your keys securely on their own server
> The custodian is responsible for backup
Non-Custodial
> User private key control (full/complete control)
- responsible for storing and securing the keys
> More secure
- higher level of security, minimize the risk of hacking or unauthorized access
> User is responsible for backup
- decentralized and self-managed option
> Third-party (exchanges/service provider) private key control
- the user does not have direct control over private keys
> Less secure
- willing to trust a third party to manage your keys securely on their own server
> The custodian is responsible for backup
Non-Custodial
> User private key control (full/complete control)
- responsible for storing and securing the keys
> More secure
- higher level of security, minimize the risk of hacking or unauthorized access
> User is responsible for backup
- decentralized and self-managed option
Costodial wallet are wallet controlled by some Crypto exchange, which have total access of the coin sent to it, and the private key is held by the Crypto exchange which is also called (CEX) Centralized Exchange.
Non custodiall wallet are wallet use by an individual, which does not require a third party for transportation. Which users has total control over it. Each individual has it private keys. And it's otherwise know as (DEX) Decentralized Exchange
Non custodiall wallet are wallet use by an individual, which does not require a third party for transportation. Which users has total control over it. Each individual has it private keys. And it's otherwise know as (DEX) Decentralized Exchange
Everyone needs to use different types of wallets to work with cryptocurrencies. Wallets are definitely needed to work in crypto. Generally we understand a wallet as a thing that stores all the savings of our daily life. By my question everyone will understand what I mean, what and which are custodial and non custodial wallets.
As a newbie, your question is very valid, as this is one of the most important things that you need to understand.
A custodial wallet is the one that you open in an exchange, and they will manage the account for you. They have access to it, therefore, you're not in total control of the coins inside. It is not advice able to leave all your crypto coins in an exchange, because if the exchange folds up or is scammed, your crypto asset will be affected. It is said that if it's not your keys, then it's not your coin. This saying is only applicable in custodial wallets.
A none custodial wallet, is the one that you have control over, it's your passwords and your seed phrase, therefore you have full autonomy over it. It is decentralized, so no third party can access your wallet, except you misplace your passwords or seed phrase, or if they are compromised. So it's very important to keep your passwords and seed phrase in a very secured place, so scammers will not see them and access your wallet.
By my question everyone will understand what I mean, what and which are custodial and non custodial wallets.
A custodial wallet holds your private keys with them, this also means that the access keys required to use in getting hold of your bitcoin on the blockchain is with the exchanges.
A none custodial wallets is just a direct opposite of what I've been just explained here, you're in charge yourself in having access to your private keys with you.
Like when we intend to trade on a centralised exchange, we have to move the funds there. Keep in mind that funds aren't safe to exchange and move them to your non-custodial wallet after trading.
Reminder: do not keep your money in online accountsStoring money in online accounts, in centralized exchanges is risky. They only give us public addresses but don't give us private keys. Without private keys, they control our funds. Even they share private keys with us, a user is no longer the only person who controls the private key, the exchange has it too. With this, a private key is no longer a private key and exchange co-control our funds, it's risky.
Quote
For long-term holding, we must have a non-custodial wallet. For best practices, I always advise using a hardware wallet as a non-custodial wallet. You have to learn and study more to realise what type of wallet you actually need.
Hardware wallets are close source and open source. Choose open source ones to use is better.[LIST] Open Source Hardware Wallets
Custodial means coins aren't under your control; non-custodial means you are the owner of your funds and you can do whatever you want. Based on this, we may need a different wallet for each individual. Like when we intend to trade on a centralised exchange, we have to move the funds there. Keep in mind that funds aren't safe to exchange and move them to your non-custodial wallet after trading. For long-term holding, we must have a non-custodial wallet. For best practices, I always advise using a hardware wallet as a non-custodial wallet. You have to learn and study more to realise what type of wallet you actually need.
Everyone needs to use different types of wallets to work with cryptocurrencies. Wallets are definitely needed to work in crypto. Generally we understand a wallet as a thing that stores all the savings of our daily life. By my question everyone will understand what I mean, what and which are custodial and non custodial wallets.
You can easily found a list of custodial and non custodial wallets if you would have searched on google but if you wanted to get information from us then a simple rule is if a wallet is providing you the seed phrase of your wallet then its non custodial and if it don't provide any seed phrase then its custodial wallet.For example Electrum for storing BTC or Trust wallet for storing any type of token.
And keep one thing in mind that, our assets are not saved in any wallet instead they are saved in our seed phrase or recover phrases. And once those seed phrases are gone our assets are also gone. But if the wallet is gone our assets still remains.
a wallet as a thing that stores all the savings of our daily life.
Wallet don't store our bitcoin, the blockchain does, wallet only helps us with having the required access pass to get hold of our bitcoin on the blockchain and not that our bitcoin is stored in them,
By my question everyone will understand what I mean, what and which are custodial and non custodial wallets.
A custodial wallet holds your private keys with them, this also means that the access keys required to use in getting hold of your bitcoin on the blockchain is with the exchanges.
A none custodial wallets is just a direct opposite of what I've been just explained here, you're in charge yourself in having access to your private keys with you.
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I wouldn’t say these are the best Non custodial wallets but probably they are the some of the best out. Firstly the OKX included there is an exchange and not a non custodial wallet AFAIK. There also other wallets there that are not open source and that doesn’t make them one of the best. When recommending wallets that are open source and non custodial I will suggest wallets like Bitcoin core
Electrum
Trezor
Passport
samourai
BlueWallet
Unstoppable
And any other wallet. OP should know that an open source wallet doesn’t mean it is immune to hack attack but rather the source code are open to the public to review and should the developers tried to temper with anything tech savvy people will be able to see it.
It looks like our friend Mr AirtelBuzz does not know English so well and also has no much knowledge about custodial and noncustodial wallets. He therefore decided to use AI to generate text for him to post here, and in the process he ended up posting wrong information.
This is why use of AI to make posts in the forum should be completely discouraged.
Short answer:
Long answer (I suggest reading it): https://chainsec.io/wallets
- Custodial: a company will have control over your funds
- Non-custodial: only you have control over your funds
Long answer (I suggest reading it): https://chainsec.io/wallets
Yea, Simple answer from you sir, Wallet is an electronic service for storing payment instrument data, for example, transfers from your exchange to another wallet are recorded as sales. Well what other great options to buy and hold for investors or traders are hardware wallets or others. I think Trezor is the most popular at the moment.
By my question everyone will understand what I mean, what and which are custodial and non custodial wallets.
As a child you can give your parents your money to hold for you freely but when it's time to collect them, they give you in their terms and conditions in which you don't have a choice than to accept or your money will be gone for ever. This is similar to the custodian wallets you have the coins but in control of it because not your key not your wallet .While being a grown up and so being able to have your own personal account without the dependency on your parents run anyone to keep your money, by which you can save and get your money as it pleases you without the control of your parents or anyone. This is similar to the Non-custodian wallets, you are in control of your key and so you are in control of your wallet.
Everyone needs to use different types of wallets to work with cryptocurrencies. Wallets are definitely needed to work in crypto. Generally we understand a wallet as a thing that stores all the savings of our daily life. By my question everyone will understand what I mean, what and which are custodial and non custodial wallets.
With custodial wallet, you do not have the seed phrase and the keys. Like Coinbase.com or the Freewallet. Only what you will use to access your wallet is just email and password. With noncustodial wallet, you will have your seed phrase and your keys. The seed phrase is used to generate the keys and addresses and you only need the seed phrase to recover your wallet. They are also called self-hosted wallet.
@AirtelBuzz
Know that centralized exchanges are different from custodial wallet. Although, centralized exchanges have their own custodial wallet which they keep customers funds as well. Binance, OKX Kucoin and BitMex are exchanges. Also know that Exodus and Coinomi are close source and not recommended.
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