Buying a Cryptocurrency is getting more popular! Many people invest their hard-earned money in this Crypto marketplace for their futuristic plans. If you buy Cryptocurrency, next you move on to the next step – To choose a custodial or Non-custodial wallet to store your assets.
One of the ideal business models in the Crypto ecosystem is Cryptocurrency Wallets. But the entrepreneurs’ confusion doesn’t end with specifying the “right” business model that includes both Blockchain and Cryptocurrencies flawlessly.
While many discussions about Blockchain exceed Cryptocurrencies, How to Build a Blockchain wallet, and Which Cryptocurrency will evolve into a single Global currency, Most people are focusing on picking the right wallet as per custody of Private key: Custodial and Non-Custodial Wallet Difference.
In this article, we will see the comparison between Custodial vs Non-Custodial wallet. Let’s uncover the basics of Blockchain wallet types.
Let’s start with the Custodial Wallet first…
What is a Custodial Wallet?
A custodial Wallet is one type of Blockchain wallet. In this wallet, the private keys of the wallet are held by the Third-party or admin. This means the third party of the wallet has complete control over the funds and assets of the users. While the users only have permission to send or receive payments.
What is a Non-Custodial Wallet?
A Non-Custodial Wallet is a type of Blockchain wallet. In this wallet, the private keys are held under the user’s control. This implies that users have complete access to the funds or assets.
Custodial Vs Non-Custodial wallet: Understanding the major Difference
1) Custodian of the private key
This is the foremost aspect to consider when comparing Custodial vs Non-custodial wallets is who owns the private key.
Custodial wallet – The middleman or third party of the wallet holds the private key.
Non-Custodial Wallet – All the Blockchain custodian services reside with users.
So, if you have an idea to create your own wallet where the users can be their own bank, go with the idea of creating a Non-custodial wallet also called a Self-custodial wallet.
2) Transaction type
Another aspect to consider during Custodial and Non-Custodial wallet Comparison is Transaction Type.
Custodial Wallet – When comes to the Custodial wallet, the transaction is not reflected on the Blockchain.
Non-Custodial Wallet – The transaction is reflected on the chain in real-time in Non-custodial.
3) Security
Custodial Crypto wallet
- In the case of a Custodial wallet, all the sensitive user data is stored in hot & cold storage, which is often hacked by data intruders.
- So, the security level is low in Custodial, unless the authorized party executes robust security measures.
Non-Custodial Wallet
- Whereas with the Non-Custodial Crypto wallet similarity, the whole information remains with the users.
- This eradicates the risk of data being stolen until the user transfers the points with someone or their device gets stolen.
4) Backup and recovery possibility
Custodial wallets
- Custodial wallets keep the private key with themselves.
- So, even if you lose access to data, you can retrieve access by requesting a third party.
Non-Custodial wallets
- When it comes to the other aspects of Backup & recovery possibility, self-custodial wallets lag after the Custodial ones.
- However, this is not possible in the case of self-Custodial wallets where you are the only authority.
5) Offline accessibility
Custodial Wallet
- To access your funding and related details, it is a must to login into your Custodial wallet and request centralized authority.
- This creates it crucial to have internet connectivity.
Non-Custodial Wallet
- But, there is no such essential in Non-Custodial wallets.
- This in return means that Non-Custodial wallets are a more suitable option to enjoy full blockchain development services in real-time.
6) Future Scope
As per the cryptocurrencies market trends, Non-custodial wallets will continue to get an edge over Custodial due to the growing data breach cases and users evolving more aware of their data privacy and protection
7) Examples
Popular Examples of best Custodial wallets
- Free wallet
- Binance
- BitMex
- Bitgo
- Blockchain.com
Non-Custodial wallets are
- Electrum
- Exodus
- Ledger Nano X
- Trezor One
- Wasabi
- Zengo
While the above-mentioned difference between Custodial vs Non-Custodial Wallets aspects will help you in picking the right Blockchain wallet, we highly suggest Non-Custodial wallets. This list of Non-Custodial wallets delivers great possibilities and holds a better future in the marketplace. Something which in turn shows itself as a thriving business determination.
Now let’s dive into the Advantages of Custodial vs Non-Custodial Wallets.
Benefits included in Custodial Wallet
Free transactions
- One of the most prominent advantages of a Custodial wallet, unlike other wallets, doesn’t require a transaction fee.
- It permits customers to make transactions for free within the ecosphere.
- A perfect example of this Custodial wallet is Freewallet.
- It helps consumers save around $500,000 on network fees back in 2019.
No major effect of lost private keys
- A third party or middleman contains your custodial wallet.
- So, even if you lose your private key or forget the reminiscent phrase.
- It is comfortable to retrieve access to your wallet and your accumulated funds.
Higher backup possibility
- Another benefit of custodial wallets is that the centralized authority handling your wallet shows backup capabilities.
- This drives it easier to undo any transaction or revive a prior version.
Benefits of Non-custodial Wallets
Instant withdrawals
- Unlike the best Custodial wallets, these wallets do not need validation from a third party for executing every transaction.
- This simplifies the whole technique and makes it easier to enjoy instant withdrawals.
- With this covered, let’s look into the constraints of non-custodial crypto wallets to create a neutral decision.
- However, to relish its benefits, users must store their keys securely.
Users’ control over funds
- The prime reason why Non-Custodial is gaining enormous momentum is that they deliver users individual access to their funds.
- The users need not look up to any third party to handle their funding or execute any corresponding activity.
Safety in funding
- Since all the details related to your online Crypto wallet and its funds depend on you, the risk of a data breach is much lower.
- This is one of the main reasons why 66.5% of crypto holders are relying on Non-custodial and mobile storage solutions these days.
Summing Up
The major difference between a custodial and non-custodial wallet is that the private key in a custodial wallet is handled by a third party. But in a Non-custodial wallet, users are fully in control of their assets.
If you are planning for Cryptocurrency wallet Development, shake hands with Zodeak. We determine the development of custodial & non-custodial wallets while concentrating on security and user-friendliness. Our Blockchain experts build customized wallets from the ground up, at the same time, we are known for our White label Crypto wallet solution reinforced with state-of-the-art security and elements to provide first-rate performance.
Schedule a free demo of our white label wallet solution or connect with our Business experts to get guidance on how to create a cryptocurrency wallet via,
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