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Custodial wallets vs non-custodial wallets – Crypto-currency

ByWealth Diagram

In crypto-currency there is a difference between custodial wallets and non-custodial wallets.

Custodial wallets vs non-custodial wallets

Public Address

Crypto Wallets are suppose to have a public address. This public address is like a public bank account on the blockchain that everybody can see. Every body can know how much crypto coins you have on this public address.

However, even though it’s public, people don’t know who this address belong to unless you associate that address with you . Like publishing your public address on a forum and letting people know that the address belong to you.

Private key

Wallets are suppose to have private keys. The private key is like your ID and signature on the blockchain. Who ever have the private key has access to the wallet.

Custodial wallets

Custodial wallet is like having money in the bank. A centralized company take care of you money. you give your money to them and they hold your money.

Pros

  • Beginner friendly
  • You have a User name and Password
  • You can set up a 2x Factor authentication
  • you can contact the company to reset login info, if you forget.

Cons

  • You are not the bank.
  • You don’t hold the private key
  • The government can take your money
  • Your money can be frozen and taken, example by a default judgement if you owe money.
  • Less options

Non-custodial wallets

Custodial wallet is like you being your own bank.

Pros

  • You are the bank.
  • depending on the wallet , may not be beginner friendly
  • You have the Private Key.
  • More options such as wallet, exchanges, apps

Cons

  • If you lose your private key, you lost your money
  • Way too advance for some people depending on the wallet,
  • might be too technical for some people.

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