Non-custodial Wallet

Written by Max Hinchman

Introduction

A non-custodial wallet is one that allows users to maintain their private keys and have control of the funds. A non custodial wallet offers the best security and also comes in different forms.

A hardware wallet is an example of a non custodial wallet. They are physical devices that can be similar in appearance to flash drive, and are not connected to the internet. There are also web-based and mobile non-custodial wallets that allow users to access from any devices by using their private key to login. Users can also download a desktop wallet but the keys can be stolen if the computer itself is stolen. The last kind of non custodial wallet is paper, where users can choose to keep their private and public keys on paper but there are obvious physical risks to that.

Many cryptocurrency holders still prefer to use a custodial wallet, which are provided by exchange sites like Coinbase and Bitfinex. These exchanges hold the private keys of the users and therefore you have no chance to ever lose your private key. While this service does provide convenience to users, the biggest problem is that a third party ultimately controls the users’ private keys and is therefore susceptible to a hack.

Suggested Reading

The Difference Between Custodial and Noncustodial Cryptocurrency Services by Jamie Redman

Custodial vs. Non-custodial Wallets by Atomic Wallet

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