Custodial & Non-custodial Wallets: Not Your Keys Not Your Coins

If I was just starting my crypto journey with the same knowledge I have now, I’d have made better decisions all year long. But since the Blockchain is being adopted daily, it’s best I put out content to help newbies and those who don’t have any knowledge regarding Blockchain wallets.

Have you ever heard of any crypto jargon? I had put out a blog post detailing the latest crypto slang on the internet.

In this blog, I will be sharing my idea on the types of crypto wallets, their pros, cons, and the best time to use them.

Wallet Types
Firstly, let's look at what a crypto wallet is; Just as the physical wallet, a crypto wallet is a digital safe place used for storing, sending, and receiving crypto. A crypto wallet can also be used to communicate with Dapps ( Decentralised applications).

Unlike the physical wallet that we are used to, the crypto wallets have information that is shown to you on account creation. For example; the Private Key & Public Key. This post isn't meant to dive deep into wallet details. Kindly refer to this post if you need to gain more knowledge on that aspect of the Blockchain.

However, As a Blockchain enthusiast, I have come to realize that the wallets used for storing crypto funds are of two different types.

• The Custodial Wallet
• The Non-Custodial Wallet

Custodial Crypto Wallet

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This is a type of wallet where users' cryptos, private, and public keys are managed by a third party known as an Exchange or custody service provider.
An example of such are; Binance Exchange, Binance Custody, Coinbase custody, and Gemini. Just to name a few...

Non-Custodial
As the name says, there is no third party managing users' funds or keys. The users are literally their own bank. They bear the responsibility for the assets and keys to their wallet. If their keys are comprised of crypto stolen, they have nowhere to file a complaint. KYC isn't required to own this type of wallet. Example of this type of wallet is; Trustwallets, Hive wallet, Tokenpocket, and so on...

Which Wallet DO I prefer?

The two types of wallets are useful in different situations. But for me, I currently make use of both. I understand the risk of having a non-custodial wallet as stated above and I'm glad I have never been a victim of a hack or lost private keys.

I mostly make use of custodial wallets for p2p and spot trading. The two wallets are very useful I must. But as for me, using both is okay. After all, never keep your eggs in one basket.

When it comes to the advisable wallet for newbies, I'd suggest they use a custodial wallet until they've gained a better knowledge of how wallets work before migrating to private wallets of their choice.

Nevertheless, most of my assets are on non-custodial wallets which is why I stand by this saying; Not your keys, not your coins.

Elon Musk's Opinion?
So, lately, Elon Musk has in one way or the other appeared in my post and I'm sorry it's happening again today because he has something to say about crypto wallets.

Sometime in 2021, He dished out a piece of wallet advice in a tweet;

Any crypto wallet that won’t give you your private keys should be avoided at all costs

https://twitter.com/elonmusk/status/1359400199521783809

I'm sure that by now, we know the risk and benefits of using a non-custodial wallet likewise for a custodial wallet.

What type of wallet do you use?

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