Comprehensive Guide to Custodial vs Non-Custodial Wallets

Dive into the intricacies of Custodial vs. non-custodial wallet.

Are you buying digital assets in 2024?

Then you must think about what type of wallet will you use to store and protect your cryptocurrencies. 

It is crucial to select a secure wallet for your digital assets when you buy cryptos. Two types of wallets are often considered- custodial and non-custodial wallets. But which one to choose is still a confusion among many users.

In this article, you will get to understand the difference between custodial and non-custodial wallets, their pros and cons, and how OnGraph can help you build crypto wallets.

What is a Crypto Wallet?

First, you must understand what crypto wallets are.

Most people have a wrong perception of crypto wallets that they store currencies and allow them to execute transactions on the blockchain. But, it only generates an address to identify your assets on a blockchain network, thus, you must protect it.

To ensure security, crypto wallets use two types of keys- private and public. 

• Public keys- are the details like account addresses that are shared over the network and are accessible by everyone to make transactions.
• Private keys- these are the details like passwords that are secured and are not shared. 

In the last few years, people have invested in cryptocurrencies, raising the global crypto wallet market. Thrive your business with secure crypto wallet development. 

We have two types of crypto wallets- custodial and non-custodial. 

Also Read- Top Blockchain Trends to Embrace in 2024

What is a Custodial Crypto Wallet?

A custodial wallet is where a third party handles your private keys on your behalf. They can access all your digital assets, manage your wallet key, sign transactions, and most importantly safeguard your crypto assets or cryptocurrencies. 

• These wallets are provided by centralized crypto exchanges or a third-party custodial wallet provider. You will manage all your funds and transactions via the wallet provider’s interface. These wallets are popular among newcomers, who do not want to deal with technical details. 
• The custodian wallet provider secures your tokens using different security measures, such as two-factor authentication, email, and mobile verification, and others.

According to ZionMarketReseach, the custodial wallet market will rise to 686 million in the coming years. 

Common Custodial Wallets to Choose in 2024

Benefits of Custodial Wallets

• It comes with a user-friendly interface to track your funds, assets, and trading. 
• Easy option for newcomers as they do not have to understand technical details.
• It keeps your assets safe as it offers security through insurance coverage.
• It has lower transaction fees, benefiting users seeking cost-effective asset transfers.
• It offers high interest rates and staking services, creating opportunities for users to earn income.

Disadvantages of Custodial Wallets

• You do not have complete control over your keys and digital assets.
• Your funds and keys are at risk of being compromised.

Thus, you need more secure and reliable wallets that you can control. Such wallets are- non-custodial wallets.

Read- DeFi Lending: How to Earn Passive Income with Crypto

What are non-custodial Crypto Wallets?

A non-custodial wallet also called a self-custody wallet is controlled and owned by you. There is no third party available. You manage all your assets, holdings, private keys, and transactions over a blockchain network.

You will get a 12-word seed phrase while creating the wallet that generates public and private keys and acts as a backup if you lose your device. If someone has this phrase, they can access all the money in the wallet.

Common non-custodial wallets to use in 2024

Benefits of non-custodial Wallet

• You can control funds, eliminating the need for third parties to manage funds.
• It ensures security as you get full ownership of your crypto wallets, decreasing the risk of data breaches.
• You can withdraw funds easily without the need for third-party confirmation.

Disadvantages of non-custodial Wallet

• Losing your special key means losing your money forever in decentralized wallets.
• Decentralized wallets can be confusing because you’re in charge of everything.
• Trades take longer in decentralized wallets compared to other wallets.

Custodial vs. Non-custodial: Which One to Choose?

Now, you completely understand both types of wallets- custodial and non-custodial. Let’s help you with their core difference to make more informed decisions.

Custodian of Private Key

The major difference between custodial and non-custodial wallets lies in who holds the private key of your wallet. In custodial wallets, a third party holds the private key and manages assets on your behalf. On the other hand, in non-custodial wallets, you control your keys.

Transaction Type

Another factor to consider while choosing a wallet is the type of transaction they incur. Non-custodial wallets ensure that the transactions happen directly on the blockchain in real time. On the other hand, in custodial wallets, transactions might take time to reflect on the blockchain.

Security

Security is a big concern. Custodial wallets store your data on their servers, making them prone to attackers. On the other hand, non-custodial wallets keep your information to yourself, reducing the risk of data theft unless you share the details.

Backup and Recovery

There could be chances of losing passwords and private or public keys. So you must consider the backup plans of these wallets. But with custodial wallets, you can recover your access because they hold your private key. On the other hand, non-custodial wallets do not have this option. If you lose your key, you cannot track your assets.

Offline Accessibility

Accessibility to your assets anytime is a great functionality. Accessing them offline is a plus point. Custodial wallets usually require internet access to interact with their services. But, to access non-custodial wallets you do not need constant internet access, making them more convenient for users.

So, if you want more control and security over your crypto, non-custodial wallets are the way to go. Choose ROVI non-custodial wallet that securely holds your data and manages assets by implementing strong security standards.

ROVI Wallet

Simplest Crypto Wallet built for the Masses. Currently available on web platforms, but coming soon for mobile devices as well.

• Your Entry to Daily Life Crypto- Create a safe wallet using Gmail and a secure PIN, and claim your personalized unique name for the wallet. Share wallet link on messaging/email. Get paid
• Buy, Sell, Trade Top Tokens- Buy/Sell BTC, ETH, and 400+ tokens. Withdraw your tokens in local currency in 100+ countries. Transfer tokens to any wallet in 1 click.
• Win Daily Crypto with Social Games- Battles. Tournaments. Solo. Trivia. Slots. Use tokens in your wallet and win daily crypto. Make new friends on audio, video, and live chats.
• Refer Friends and Earn Crypto- Refer friends in 1 click using your link. Earn crypto per referral who joins. Play with friends and have fun competing.

Also Read- How Much Does Blockchain App Development Cost: A Detailed Overview

The Decision

The decision between custodial and non-custodial cryptocurrency wallets boils down to personal preference and what you need them to do.

If you are a beginner and like a simpler method, choose custodial wallets from trading platforms or regulated services. If you want greater control over your money’s access, go for non-custodial wallets.

Consider all the factors before you buy cryptos and choose your wallet wisely for secure transactions. Scale your business with OnGraph’s blockchain development services. Hire our experts covering from building safe decentralized applications to robust blockchain integrations. 

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