The last few years have seen tremendous growth in the cryptocurrency market. People have started believing in digital money. Awareness about digital investment and digital money has increased. But before investing in anything, you should know about it in depth.
Many cryptocurrency terms revolve around the crypto market. One of the most common terms used in the cryptocurrency market is a crypto custodial wallet. So you may ask what a crypto custodial wallet is and the types of crypto wallets? What is its importance in the crypto market?
Let's dive into the topic.
What is a Crypto Wallet?
A Crypto wallet is not like a regular wallet in which you keep the cash. It has a whole different definition in the crypto world. A Crypto wallet is an address that records buying and selling on the blockchain. In simple words, It is a program that allows you to transfer or store your cryptocurrency.
Crypto Custodial and Crypto Non-Custodial Wallet
Let’s understand the basics and the difference between crypto custodial and non-custodial wallets.
What is a Crypto Custodial Wallet?
When we get money from the job, we usually keep it in the bank or give it to someone to manage it. Cryptocurrency is also like cash. You need to store it at a place and keep track of it.
A Crypto custodial wallet is like a bank. You have to give all the details and trust to the third party. With the custodial wallet, another party controls your private keys. They secure your fund and return them whenever you want. These days custodial wallets are web-based exchange wallets.
The custodial portfolio is less risky than it used to be. Now cryptocurrencies are gaining popularity, and reputable companies act like “cryptocurrency banks.”
In the early days, trusting someone online was hard. It means they will access your funds and run away with them. Examples of crypto custodial wallets: Bitgo,Blockchain.com and BitMex.
What is a Non-Custodial Crypto Wallet?
With a non-custodial wallet, you are the controller of your private keys. There is no need to involve a third party or trust a third party while using this wallet.
This also means that you are the only person responsible for losing your private keys. Thus, you have to take precautions to protect your funds from loss. Examples of non-custodial wallets: Nano X, Zengo, and Wasabi.
The Benefits of a Crypto Custodial Wallet
Crypto investors are more inclined towards custodial wallets. Because of its add-on benefits. Let’s know what the benefits of choosing a custodial wallet are.
Trusting a third party relieves you from the fear of losing funds
If you have lost keys, you have to reconfirm your identity and regain access to the wallet.
The custodial wallet has a backup feature
A custodial wallet gives you fast access to your funds
The transaction is cheaper as compared to other wallets
In the custodial wallet, it is much easier to seek help
It makes trade easy, without worrying about losing the keys
A custodial wallet takes the responsibility to secure your keys
Cut the chance of losing your investment
Due to the involvement of various conformations, it is tough to get hacked
Drawbacks of a Crypto Custodial Wallet
Everything that has benefits comes with certain drawbacks, so does the custodial wallet. Here are some of its drawbacks.
You don’t have autonomy of your wallet
One can not gain access to the funds and services without proving identity.
No offline facility
Data breach threat
Choosing between the custodial and non-custodial wallet is your choice. It depends on how you see computer security. If you are pro at cryptocurrency trading then, you can choose a non-custodial wallet, and if you are tech-savvy, then a custodial wallet can be a better choice. Remember, every investment, whether invest in cryptocurrency or otherwise, has risks. It is up to you to decide whether you can afford to take the risk or not.
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