To begin with, a cryptocurrency wallet is a software function that allows users to acquire, audit, and transfer digital currencies.
Due to the growth and increase in the use of digital currencies, life-saving Cryptocurrency wallet development has hit the world with a significant role that helps to safeguard and monitor the cryptocurrencies.
Once the cryptocurrency is transferred to the wallet, it means the ownership of the currency is signed off to a dedicated wallet address.
Now let’s discuss how to choose the right custodial or non-custodial crypto wallets.
Basically, in a custodial wallet, the private key is held by the third party. This gives complete control over all your cryptocurrencies to the third party, but whereas the users can only authorize them.
In a custodial wallet, a third party has the authority to manage all the funds while the users cannot perform any transaction without their intervention.
Perks of custodial wallet
- In a custodial wallet, the customer need not have to pay for the transaction fee as it is free within the network.
- As said earlier, if there is any loss of private keys or if the user forgets the password, it is quite easy to retrieve because the third party manages the wallet.
Drawbacks of custodial wallet
- The main drawback of the custodial wallet is the third party is controlling all your fund management, associate process, including freezing the amount.
- Access to user funds can be a loss or theft, and this might raise any hacking or encounter any security breach.
Unlike custodial wallets, the non-custodial wallets are typically a blockchain-based cryptocurrency wallet that allows users to be their own control.
It offers users with two types of private keys to perform transaction mnemonic seed and raw private key.
The mnemonic seed is a real private key that consists of 12 to 24 word bit values stored on computers and gives simultaneous access to multiple accounts.
A raw private key is a real-free form of a private key that is also stored in computers.
Perks of non-custodial wallets
- The main advantage of non-custodial wallets is that they provide individual access to the users on their funds. Basically, they do not have to look up for any third party to manage their funds.
- There is a low risk of a data breach as the details are associated with the user crypto wallet, and the funds are totally relying on the user.
Drawbacks of non-custodial wallets
- Since the wallet is not managed by any third party, if there is a chance of losing the private key or mnemonic seed, then it’s difficult to retrieve them.
- Losing your private key can help hackers to access your wallet, so users must safeguard their key.
Taking the thought forward, these wallets offer ample opportunities for a better future in the digital market. It is wiser in planning or choosing your cryptocurrency wallet or multi-cryptocurrency wallet from the best blockchain experts.