Custodial or Non Custodial Wallet in Cryptocurrency
What is Non Custodial and Custodial wallet?
Cryptocurrency and blockchain are gaining momentum. If you want to know, there are hundreds of types crypto wallets to store your crypto. To choose a wallet, usually the user will choose a simple and very secure. Most beginners, they will often keep their crypto asset in exchanger. And most of them also keep their crypto assets in Custodial Wallet.
Basically, when you store your crypto assets in the exchanger. This mean, you give. This mean, you provide a trust or middleman to control your assets.
What is a Custodial Wallet?
Custodial wallet is third party such a Exchange or Brokerage services. It is also where third parties can control your crypto assets. Custodial wallet is where third party holds your private key. This mean the third party has full control over your assets.
Third party only allows you to do two transactions, which is Send or Received only. In custodial wallet, third party will manage all your crypto assets and funds and pay the entire financing on the condition that users cannot perform any transactions, if a third party is not involved.
What are the advantages of Custodial Wallet?
1. Free Transactions
One of the main advantages of custodial wallet is that there are no transaction fees. The fees are Free!. This allows users to make free transaction in the ecosystem.
2. No Major Effect of Lost Private Key
In this wallet, there is a third party that manages your wallet. If you lose your private key, you can get it back .
3. Higher Backup Possibility
Among the advantages of custodial wallet is having Central Authorities which is where it manages your wallet. It works to manage or restore all transaction that have ever occurred.
What about the weaknesses of the custodial wallet?
Among the disadvantages of the custodial wallet are:
The first is - custodian's control over your money
The biggest disadvantages of going with custodial services is that you do not have autonomy over your wallet.
The second - Need for KYC
Need for KYC or knowingly as know your customer, ID verification. The Custodian is very strict in requiring your KYC. If you do not provide your KYC, the Custodian will not allow you to make any transactions in the wallet.
The third - Data Breach Threat
Although Custodian may not be an easy target for hackers, they are still vulnerable to security breaches.
The fourth - No Offline Facility
The internet connection is a must for logging in the wallet or to perform any transaction.
That is some info about Custodial Wallet. Next is about Non Custodial wallets.
There are various non custodial wallets available in the marketplace, while a number of non custodial wallet are getting added on an everyday basis, because of the benefits that non custodial wallets carry over custodial wallets.
Non custodial wallet is that it is a type of blockchain wallet that lets you be your own bank!. This implies that you have full control over your funds and on the associated private key. These wallets serve users with two types of private keys to perform a transaction.
1. Mnemonic Seed
It is usually a value of 12-24 word designed by encapsulating the real private key. This key, stored on the user devices, allows them to access multiple accounts simultaneously.
2. Raw Private Key
It is the actual private key in raw form (alphanumeric string) which is also stored on the user device.
What are the advantages of Non Custodial Wallet?
The first - User's Control Over Funds
The prime reason why non custodial wallets are gaining a huge momentum is because they provide users an individual access to their funds. You need not look up to any third party to manage their funding or perform any related activity.
The second - Safety in Funding
Since all the details associated with your Crypto Wallet and its fund relies with you. The risk of date breach is much lower. This is one of the primal reasons why almost 70% of crypto holders are relying on non custodial.
The third - Instant Withdrawals
Unlike custodial wallets, these wallets do not need confirmation from a third party for performing very transaction. The streamlines the whole process and make it easier to enjoy instant withdrawals.
If you want to know that recently, non custodial wallet providers are popular, now because or the high UI (User Interface). Non Custodial wallet providers have experienced tremendous success.
However, the next generation will be even easier to use thereby replace the alphanumeric key. Whatever you want to get involved in, make sure you do due diligence first
Read also: Token VS Coin Difference in Cryptocurrency
Reference: https://youtu.be/bQz8KWoVuYQ
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