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A custodial crypto wallet is like having someone else hold and manage your digital assets for you. It means that a third party takes care of your private keys which are like the keys to your cryptocurrency. With the wallet, you don’t have full control over your funds or the ability to make transactions on your own. However, using a the wallet isn’t a bad thing.
In the early days of Bitcoin, everyone had to create and manage their own wallets and private keys. But was difficult and risky for beginners. If you lose or someone steals your private keys, you could lose your crypto forever.
Reports suggest that over 3 million Bitcoin might be lost forever.
There have also been cases where people couldn’t access their crypto because the private keys were only known by the original owner. To prevent such incidents, you can share access to your assets with a custodian. Even if you forget your password on a cryptocurrency exchange, you can still get help from customer support to access your account and assets. But if you use a non-custodial wallet, it’s your responsibility to keep your crypto safe. That is why, using a custodial wallet makes sense.
However, it means trusting a third party with your private keys.
When looking for custodial services:
- Check if they are regulated
- What services do they offer
- How do they store private keys
- If they provide insurance coverage
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What Is Non-Custodial Crypto Wallet?
The non-custodial wallet is a wallet where you are alone and have control of the private keys. There are no intermediaries involved, so you can trade cryptocurrencies directly from your wallet.
It’s great for experienced traders and investors who know how to handle and protect their keys and seed phrases.
You need the wallet when using a DEX or DApp. Uniswap, SushiSwap, PancakeSwap, and QuickSwap are examples of decentralized exchanges that require a non-custodial wallet.
Trust Wallet and MetaMask are good examples of non-custodial wallet service providers. It’s your responsibility to keep your seed phrase and private keys safe.
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