What is the difference between a custodial and a non-custodial wallet in crypto?

When it comes to crypto, you have a few different options when it comes to storing your funds. You can use a custodial wallet or a non-custodial wallet. So what is the difference between a custodial and a non-custodial wallet? Let us help you decide which type of wallet is right for you!

Custodial Wallets

A custodial wallet is one where the private keys are held by a third party, such as an exchange. This means that you don't have full control over your funds, and if the exchange is hacked or goes bankrupt, you could lose your money. However, custodial wallets are easier to set up and use, and they offer more features than non-custodial wallets.

Non-Custodial Wallets

A non-custodial wallet is one where you hold the private keys yourself. This means that you have full control over your funds, and if you lose your private keys, there is no way to recover them. However, non-custodial wallets can be more difficult to set up and use, and they often have fewer features than custodial wallets.

Which is right for you?

So which type of wallet is right for you? If you opt to go with the custodial option you should know that you are not in full control of your coins. We always suggest non-custodial if possible. There are certain circumstances where custodial solutions are the best option, such as when interacting with the Lightning Network for example. However, we never advise keeping significant funds in a custodial wallet. Non-custodial always wins. Check our wallets guide to find links to the main wallets.