When it comes to storing cryptocurrency, there are two main types of wallets to choose from: custodial and non-custodial wallets. Understanding the difference between these two is important for managing your crypto assets effectively.

Custodial wallets

A custodial wallet is one where a third party, such as an exchange or service provider, holds your private keys on your behalf. In other words, they take care of the security and management of your wallet. 

With custodial wallets, users don’t have to worry about losing access to their funds due to a forgotten password or lost private key, as the service provider can help you recover your wallet. 

Non-custodial wallets

In contrast, a non-custodial wallet allows you to be in full control of your private keys. Only you have access to your wallet and funds, giving you complete ownership and responsibility. 

Non-custodial wallets are typically used by those who want more control over their assets and prefer not to rely on third-party services. 

With this control comes the responsibility of managing your private keys. If you lose your private keys or recovery phrase, there is no way to recover your wallet or access your funds. 

Non-custodial wallets offer more privacy and security, but require users to be more diligent about safeguarding their access credentials.

Which should you choose?

Custodial wallets are great for beginners or those who prioritise ease of use and don’t want to deal with the responsibility of managing private keys. 

Non-custodial wallets, on the other hand, are better for users who value privacy, control, and are willing to take on the task of securing their keys.

Ultimately, the choice between a custodial and non-custodial wallet comes down to your personal needs and preferences regarding security, control, and ease of use.