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What is a Non-Custodial Wallet?
Non-custodial wallets are more secure than custodial ones and provide true ownership of crypto. There’re more pros as well as some cons to using this kind of wallet.
What does non-custodial mean? It’s a crypto wallet that doesn’t have access to your private keys and recovery phrase. There’s no intermediary between you and your assets. So, you are the one responsible for their safety.
Currently, most custodial wallets are those on exchanges, for example, on Binance:
While most mobile wallets are non-custodial, meaning they can’t access your sensitive data.
*Such wallets are also called self-custodial or self-custody.
Pros and cons
✅ True ownership. If you own your private data, you truly own your crypto. On an exchange, you can access your funds, but it has nothing to do with real ownership. The 3rd party you rely on can be hacked, block your account, confiscate your funds, etc. With a self-custodial wallet, you are the one and only owner.
✅ More security. Since no one knows your private key and seed phrase, no one can steal your crypto. However, most crypto wallets still lack security mainly due to some 3rd-party services.
✅ No Know Your Customer, anti-money laundering requirements, and sanctions (so far).
✅ No censorship. No central organization can deny your transaction, suspend your account, etc.
❌ If you lose or forget your seed phrase, you lose access to your wallet, and no one can help you to retrieve your assets. A custody wallet can be restored with the help of a 3rd-party service.
❌ Self-custody apps may be less feature-rich and less user-friendly. Over 50% of the OneArt community says limited functionality is one of the main crypto wallet issues. So, the top priority is to bring users the most secure, up-to-date, and easy-to-use app.
Which is better?
It’s up to you. But keep in mind that choosing between custodial and non-custodial = looking for a compromise between convenience and security + ownership.
