Looking to secure your cryptocurrency? Well, in my opinion, it is a sensible move. But should you opt for a custodial or a non-custodial wallet?
Cryptocurrencies and their
underlying technology, Blockchain, have gained significant traction in the tech
world in the last few years. Both developers and investors are showing a keen
interest in incorporating these two emerging concepts into their business
processes. They can relish better opportunities compared to those offered by
the traditional currency models. One business model that has emerged as an
ideal solution is the use of Cryptocurrency wallet development services.
Custodial Wallet
A custodial wallet (also known as
a hosted wallet) is a digital wallet that holds your private keys and takes
care of your funds. To put it in another way, you are trusting a third party to
secure your funds. The best part about this is that you (technically) can't
lose access to your wallet. You can't lose the private keys because you simply
don't have them.
The benefits of a custodial wallet
- Negates the risk of financial loss: Remember the key is vital
- Free and fast transactions
- Superior UI/UX
Disadvantages of Custodial wallet
- Not your keys, not your crypto.
- No offline access
- Need for KYC
Non-Custodial Crypto Wallet
Non-custodial wallets are Bitcoin
in their truest form. A non-custodial wallet is simply a piece of software on
your own computer or phone that puts you in full control of your cryptocurrency
holdings. You hold your own private keys, which means no one else is able to
make a transaction on your behalf. However, with greater power comes great
responsibility.
Advantages of Non-custodial wallet
- Taking the control back
- Low-Risk exposure
- Instant Withdrawals
Disadvantages of Non-custodial Wallets
- Your responsibility increases
- Bad UI/UX
- Lost key equals lost money.
Custodian vs. Non-custodian Wallet: Difference Disclosed
Here we will see the differences between Custodian and Non-Custodian wallets, which will help you choose what suits you the best.
Custodian of the private key
In a custodian wallet, people
give up the control of their key to a third party in exchange for access to a
password. You can recover the password if it is forgotten or lost. But for a
non-custodial wallet, you have no option to retrieve it once the key is lost.
Here the former comes on top of the latter.
Real-time transaction
Custodian wallet transactions do
not appear on the chain in real-time. Furthermore, central authority permission
is required before any transactions take place. Clearly, this gives the
non-custodial wallets a major advantage.
Security
When it comes to the
non-custodial wallet, the key and the user’s data remain intact, hence higher
security unless the key is stolen or lost.
But in the case of custodian wallets, the keys and user data are stored
in servers worldwide, which results in breaches and hacking attempts. There have
been multiple instances of the same, and it will keep happening until they
implement strong security measures.
Backup and recovery possibility
The Custodial wallets store the
special key with themselves. So, even if you lose entry to data, you can retrieve
access by inquiring with a third party.
But, this is not feasible in the case of Non-Custodial wallets where you
are a single authority.
Offline accessibility
One has to log into your
Custodial wallet to access funding and related details. Thus it is necessary to
have internet connectivity.
But, there is no such provision in Non-Custodial wallets. Thus Non-Custodial wallets are a more suitable option to experience a complete Blockchain Wallet Development Company environment in real-time.
Which is Better: Custodial or Non-Custodial?
Choosing between a custodial or
non-custodial wallet depends on what you are trying to get out of your Bitcoin
and how comfortable you are with computer security.
If you are someone who is not good with computers and is simply interested in Bitcoin for its monetary properties (the 21 million cap), then using a custodial wallet won’t be that big of a deal. You’re probably better off entrusting a third party to help you make sure that you don’t end up losing the entirety of your investment, and as long as you use a trusted, regulated entity to store your funds, you’re unlikely to run into any serious issues.
If you’re interested in the cypherpunk philosophy behind Bitcoin or are able to understand how to take responsibility for your own cryptocurrency holdings, then you’ll want to go with a non-custodial storage solution. This will allow you to make transactions in a permission-less manner and put you in complete control of your Bitcoin
Final Takeaway
The non-custodial wallet has
major disadvantages. As more and more people adopt it, there will be some
technological advancements where an easier option will replace the alphanumeric
key and the antiquated seed. With that, even custodian wallets are bringing new
changes to control their data and make it appealing for crypto enthusiasts.
Let’s see what innovation lies ahead in the world of Crypto wallet development.
In the end, it is your money – choose wisely!
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