Do you know how to keep your cryptos safe?
If you’re a beginner in the cryptocurrency industry, it’s good to be aware of the different types of wallets. One type of cryptocurrency wallet that often ends up confusing novices is the custodial wallet.
That’s why in this article, we decided to help you out. We’ll do this by looking at the pros and cons of custodial wallets in this short yet helpful guide.
Whenever you’re ready to get started with cryptocurrency and you’re making in-depth research on wallets, make sure you don’t overlook custodial wallets.
Without further ado, let’s get started!
The Pros of Custodial Wallets
A custodial wallet is a type of cryptocurrency wallet where a third party manages the private keys. This third party can be an exchange, a web wallet provider, or any other type of service that holds users’ private keys on their behalf. Custodial wallets offer several advantages over non-custodial wallets, including:
By entrusting a third party with the management of your private keys, you can benefit from their expertise in securing them. This can provide peace of mind, especially if you are not confident in your ability to keep your keys safe.
Custodial wallets can be more convenient to use than non-custodial wallets, as they often come with user-friendly interfaces and features. This can make them a good choice for those new to cryptocurrency, or those who want to avoid the hassle of managing private keys.
In some cases, using a custodial wallet can be cheaper than a non-custodial wallet, as you may not need to pay for software or hardware to store your keys.
Access to a Wider Range of Features
A custodial wallet provides a user with access to a wider range of features and functionality than a non-custodial wallet. For example, a custodial wallet may offer the ability to:
- set up multiple accounts
- add and remove funds
- View transaction history
A non-custodial wallet, on the other hand, may only offer the ability to view balance and send and receive funds. In addition, custodial wallets typically offer more customer support than non-custodial wallets. If you want such kind of feature, then view these best web3 wallet.
The Cons of Custodial Wallets
There are several disadvantages to custodial wallets too. Let’s have a brief overview of some.
Custodial wallets are less secure than non-custodial wallets. This is because the provider of the custodial wallet has control over the private keys and can therefore access the funds in the wallet.
Custodial wallets usually have high fees. This is because the provider of the custodial wallet needs to make a profit.
Custodial wallets are often not as user-friendly as non-custodial wallets. This is because non-custodial wallets usually have better interfaces and more features.
Can Be Suspended
Custodial wallets can be suspended or shut down by the provider at any time. This means that the user of a custodial wallet could suddenly find themselves without access to their funds.
An Understanding Of Custodial Wallets is Important
It is important to have an understanding of custodial wallets because they are responsible for holding, managing, and safeguarding cryptocurrencies. Custodial wallets can be used by individuals, families, businesses, and organizations.