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Aun Suhel
Aun Suhel

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Custodial vs. Non-Custodial Wallets: Understanding the Difference

**What is a Custodial Wallet?

A Custodial Wallet is defined as a wallet in which the private keys are held by a third party. Meaning, the third party has full control over your funds while you only have to give permission to send or receive payments.

**What is a Non-Custodial Wallet?

It is a type of Blockchain wallet that lets you be your own bank. This implies that users have full control over their funds and on the associated private key. If you want to know more about blockchain wallets, you can read here.

Custodial Vs Non-Custodial Wallet

*1. Custodian of private key

The foremost factor to consider when comparing the Custodial vs non-custodial wallets is who holds the private key.

In case of Custodial wallets, the third party manages the private key. Whereas, in the case of Non-Custodial wallets, all the blockchain custodian services reside with users.

So, in case you want to introduce a wallet where users can be their own bank, go with the idea of creating non-Custodial blockchain wallets.

*2. Transaction type

Another factor to consider during Custodial and Non-Custodial crypto wallet comparison is the transaction type.

The transaction is reflected on the chain in real-time in Non-Custodial. But, it is not so in the case of Custodial wallet.

This again shows that the former leads the show.

*3. Security

In the case of custodial online crypto wallets, all the sensitive user data is stored in hot and cold storage, which are often hacked by data intruders. Because of this, the security level is low in custodial, unless the authoritative party implements strong security measures.

Whereas, in case of Non-Custodial crypto wallet comparison, the whole information remains with users. This reduces the risk of data being stolen, unless the user shares the details with someone, or their device gets stolen.

So, here again, Non-Custodial wins the Custodial vs Non-Custodial wallet battle.

*4. Backup and recovery possibility

When it comes to backup and recovery possibilities, non-Custodial crypto wallets lag behind the Custodial one.

The Custodial wallets keep the private key with themselves. So, even if you lose the access to data, you can regain the access by requesting the third party.

However, this is not possible in the case of Non-Custodial wallets where you are the sole authority.

Several industries across different domains are getting their own crypto wallet app by getting mobile application development services from an experienced company.

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