Non-Custodial Wallet

A Non-Custodial Wallet also referred to as a self-custodial wallet, puts the responsibility of storing your crypto wallet private keys in your hands.

Your crypto wallet private key is like the PIN number to your bank ATM card or the password to your online bank account. With the PIN or password, you gain access to your fiat money and effectively own and control it.

If somebody gets a hold of your private key, they can not only claim ownership over your wallet assets, but they can also recover your wallet to their own device, access all of your funds, and easily transfer them out of your wallet and into another wallet they control.

With a non-custodial wallet, there is no bank or crypto exchange managing security for you.

You have complete control of your private keys and only you can confirm the funds in a crypto wallet belong to you as only you have access to them.

No 3rd party is involved in storing your keys for you. You’re all on your own!

Non-custodial wallets are considered more secure than custodial wallets because you have all of the control, and you don’t have to worry about a 3rd party, like a centralized cryptocurrency exchange, getting hacked.

Non-custodial wallets come in different variations, including web-based, software installed on a smartphone or computer, hardware devices like a USB thumb drive, or even your private key copied to a piece of paper.

Related Terms

Desktop Wallet

A common type of crypto wallet used to securely store and manage your private keys on a computer hard drive. They’re considered more secure than web-based wallets, since you can only access them from wherever your computer is located, and again, you control your private keys.

Wallet

Made up of a unique public address called your public key (similar to your bank account number) that you can share with the world, your friends, family, and other businesses and companies that you trust, to send and receive digital assets. A wallet also stores a private key (much like the PIN that you use to access your bank account at the ATM), which, when combined with the public key, confirms ownership of the wallet, and allows you as the wallet owner to view the digital record of your wallet transactions, and allows you to perform actions such as buying, selling, withdrawing, and swapping funds.

Paper Wallet

Another form of cryptocurrency wallet that is literally a physical piece of paper with your public and private keys written or printed on it. It lets you store and access your cryptocurrency offline, or not connected to the Internet.

Custodial Wallets

Personal or business wallets controlled by a company or cryptocurrency exchange (like Coinbase or Binance), which stores your private keys for you. Custodial wallets are considered less safe than noncustodial wallets because if hackers were able to access an exchange’s network, they could potentially access your private keys and ultimately have complete control of your account balance, allowing them to steal your digital assets.

Cold Wallet

Cold wallets are not connected to the Internet, providing added security over hot wallets. Cold wallets are not directly exposed to Internet security threats like hacks, phishing attempts, malware, viruses, and other attacks that could lead to the permanent loss of your cryptocurrencies and digital assets.