As you already know, it doesn’t matter what you do with your crypto: buy, sell, hold, stake, or whatever, the main thing you need to care about in the first place is how to keep your assets safe. And it’s not just about wallet backup or avoiding phishing attacks, it’s also about custody of the private keys.

For that reason, you need to understand which type of wallet is preferable to you: custodial or non-custodial. So in today’s article, we will dive into this topic and cover what are the differences between custodial and non-custodial wallets, what unique features each other has, and which one might suit your needs better.

Custodial wallet

Let’s start with the most obvious question – “What is a custodial wallet?”. By custodial wallet, we understand a type of cryptocurrency wallet where a third party holds and manages your private keys. So, the user doesn’t need to remember the keys, but at the same time it means the user doesn’t have full control of the crypto assets – the custodian does. 

The pros of custodial wallets

  • No private key responsibility
  • Deligated assets’ security: the custodian is responsible for securing your funds
  • Easy to work with: ideal for beginners who want a simple way to manage crypto without technical knowledge

The cons of custodial wallets

  • Not truly “your” crypto: users have less control of their funds, and the custodian’s authority extends to the power to freeze users’ accounts, preventing them from accessing the assets
  • The target for hackers: wallets expose users to risks like hacks, scams, insolvency, censorship, regulations, and sudden service changes beyond their control
  • Limited privacy: most custodial wallets require identity verification and collect user data

Non-custodial wallet

On the other hand, we have non-custodial wallets, which put users in full control of their crypto assets. That means you hold the private keys, so only you can access or move your funds. No third party can access your wallet or recover your funds if you lose your private keys.

But don’t worry, it’s not so easy to lose your assets, because non-custodial wallets have a backup system. By backup, wallets usually prompt users to save their private key or recovery phrase – a set of random words used to restore the wallet and access funds on a new device.

Work with non-custodial wallets is easier with Evercode Lab solutions! Our broad experience and individual approach to each request allow us to make your interaction with non-custodial wallets in the simplest way possible. Book a meeting with us and learn how you can reach new levels in crypto with white-label solutions. 

The pros of non-custodial wallets

  • Full access to funds: you control your assets entirely
  • Better privacy
  • Security: the risk of a data breach is lower since private keys and passwords remain solely in users’ control

The cons of custodial wallets

  • More responsibility for the user: you are fully responsible for recording and securely storing your sensitive information
  • Harder for beginners: the wallet’s interface can be challenging for new users and may require some time to get used to
  • No restore option: if you somehow lost access to the wallet or accidentally logged out, and you forgot your password or lost your backup, well, there’s no “forgot password” button

Final thought: which one to choose?

As we see, both custodial and non-custodial wallets play important roles in the cryptocurrency ecosystem. The right choice largely depends on your investment goals, risk tolerance, and technical knowledge.

The custodial wallet can suit you if you’re new to crypto and looking for a less responsibility level and the option to restore the password.

Choose a non-custodial wallet if you want full control of your assets, an increased level of privacy, and direct access to decentralized services.

Regardless of your choice, remember that education is your best protection in crypto. Stay informed, manage your security carefully, and choose the wallet type that aligns with your needs and experience level.

Looking to create a secure and user-friendly crypto wallet platform? Evercode Lab can help you design and develop both custodial and non-custodial wallets perfectly built to your business objectives. Reach out to our team to start creating a wallet that empowers your users with the best of both worlds.