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What are cryptocurrency wallets and how do I choose the right one?
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A custodial wallet is a wallet in which a third party, usually a cryptocurrency exchange, is responsible for managing the user’s private keys. This means that the key to your wallet is in someone’s hands.
A custodial wallet is useful for beginner cryptocurrency traders who are unfamiliar with managing their private keys. However, if the cryptocurrency exchange goes bankrupt, users may lose access to their private keys and, therefore, cryptocurrency wallet.
When considering a custodial wallet, it is critical to select a reliable cryptocurrency exchange or service provider that can keep your private keys and funds safe.
In contrast, non-custodial wallets give users complete control over their keys and assets. They are not dependent on a third party, such as a cryptocurrency exchange.
There is a common phrase in the cryptocurrency world: “Not your keys, not your cryptocurrency.” This means that if a cryptocurrency trader loses access to the private keys, he or she will lose access to all cryptocurrencies stored in the wallet.
In a non-custodial crypto wallet, the trader is responsible for storing and managing their private keys. Since it is extremely difficult to recover a lost private key for unattended wallets, users should be careful to keep their keys in a safe place.