Custodial vs Non-Custodial Wallets: What's the Difference?Nov 16, 2022
If you decide to invest in crypto, the first thing you should think about is how to protect your investments. The best way is — a crypto wallet. Though there is such a variety of crypto wallets it is difficult to choose which one is the best for you.
Crypto wallets can generally be split into two broad categories: custodial and non-custodial wallets.
Both custodial and non-custodial wallets have their pros and cons. Let's see the difference:
A custodial crypto wallet
A custodial crypto wallet is a service or an exchange in which the private keys are held by a third party. In other words, the holders won't have full control over their funds, they only have to give permission to send or receive payments.
Advantages of custodial crypto wallets:
- If the holder loses their private key custodial wallet can restore access to your account;
- Do not demand a transaction fee;
- It is easier to undo any transaction or restore a previous version in a custodial wallet.
Disadvantages of custodial crypto crypto wallets:
- Third party's control over your money;
- The custodial wallet can freeze your funds in case of maintenance or due to KYC requirements;
- You can't log in or perform any transaction offline.
- There is always a risk that your money may be stolen in case of hacking attacks.
A non-custodial crypto wallet
A non-custodial crypto wallet is a wallet where only the holder possesses and controls the private keys. For users who want full control over their funds, non-custodial wallets are the best option.
Advantages of non-custodial crypto wallets:
- Full control over your money;
- More secure because the risk of data breach is much lower;
- Do not need confirmation from a third party for performing every transaction.
Disadvantages of non-custodial crypto wallets:
- In case you lose your private key you'll lose all your money.
What type does Arctic Wallet belong to?
Arctic Wallet is a non-custodial multi-chain wallet that supports more than 200 crypto assets. The main features of Arctic Wallet are:
- Allows you to store multiple crypto assets on 25+ chains;
- Enables cross-chain transactions;
- Has built-in exchange;
- Integrates charts to follow the price in real-time;
- Offers lower fees than any exchange wallets;
- Has Mobile (Android), Desktop (macOS, Windows, Linux) apps;
- Ensures privacy as all the data is encrypted and stored on your device, not authority servers.
If you need to ease your transactions, instantly buy/sell, and exchange crypto without moving your funds into exchanges and back a non-custodial software wallet is the best way to keep your funds.