EZ Wallet is a community-driven project that encourages members’ contributions to the project’s growth. With that, Sage, one of the first original members, contributed to this article to support the Crypto 101 educational program.
▶️LET’S START WITH…
For you to be here reading this, clearly, you must have heard of cryptocurrencies. We all know they are digital assets or money. But ever wondered where we can hold, store, trade, and keep them? You should find out in this article.
🤔 WHAT ARE CRYPTO WALLETS
A Crypto wallet is or can be a simple program, software, or system that enables the storage of public and private keys. These keys, therefore, allow the user to send, receive and monetize their crypto assets(which can include cryptocurrencies and sometimes NFTs).
Your public key is a digital code formed by random numbers and Alphabets. It is used for receiving transactions only. The public key is also known as your wallet address. It serves as, for example, your PayPal email, which enables you to receive money into your PayPal account. This is the one you share/give to others to receive money from them. While your Private key is used for sending transactions only, and it is also your password(s) (pass-phrases or key-phrases). Never share your private keys with anyone, or they will have access to your assets(the money) in your crypto wallet.
👨👩👧👦 TYPES OF CRYPTO WALLET
Next, we’ll highlight the two main types of crypto wallets, which are;
- Custodial crypto wallet
- Non-custodial crypto wallet
These names are derived from the word ‘custody’, meaning ‘to take care of’. Now the critical differences between these two will simply be discussed under the following topics:
1️⃣ OWNERSHIP — This means easy access or control of the wallet. So whoever has the private keys has control over the wallet. A custodial wallet is usually controlled by exchanges since they hold your keys. But in a non-custodial wallet, you alone hold the Private keys to your wallet. In a custodial wallet, the Exchange serves as a third party and can lead to a delay or problem in trying to access your funds. In a non-custodial wallet, the assets in your wallet can be accessed easily anytime and anywhere.
2️⃣ SECURITY — Since a Crypto wallet is digital in nature, the problem of hacking exists. Unlike non-custodial wallets, exchanges are prone to hacking, which becomes a problem when dealing with custodial wallets. Custodial wallets are not as secure as non-custodial wallets.
3️⃣ ASSET OPTIONS — Cryptocurrencies(coins and tokens) are what you trade or hold in your wallet. In a custodial wallet, fewer cryptocurrencies are available for trading compared to the non-custodial wallet types. This is due to the limitations and regulations of the Exchanges in Custodial wallets.
4️⃣ PRIVACY — When opening a custodial wallet, personal information such as your ID card details will be requested to use the wallet. While, in a non-custodial wallet, none of your data is required. In a custodial wallet, your password is stored on the Exchange’s security platform, while in the non-custodial wallet, your password is held by you alone.
5️⃣ RESPONSIBILITY — Lastly, there’s more responsibility on the user of the non-custodial wallet as the security of his money (cryptocurrency assets) depends on how well he keeps his private keys secure. Also, in a non-custodial crypto wallet, there is no customer service to help recover your private keys if you lose them. Unlike in a custodial wallet, where you can reach out to customer service to help you retrieve or recover your private keys (passwords) if you ever happen to lose them.
💁 EXAMPLES
Non-custodial Wallets are Atomic Wallet, Metamask wallet, Exodus wallet, Trust wallet, etc.
Custodial wallets include Coinbase, Binance, Bybit, Kucoin etc.
🏁 CONCLUSION
Like every other thing in this world, both digital and non-digital, there are advantages and disadvantages. Knowing the difference between a custodial and a non-custodial wallet is very important, so the type of wallet you choose should depend on what you want to use the crypto assets for. For example, if you want to hold crypto, like (BTC) Bitcoin for a long time, you should use a non-custodial crypto wallet and vice versa. So, ask this first, where you keep your money is as important as WHY you hold it there.
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Lastly, Don’t forget to keep learning and take care of your money.
About Crypto 101:
Crypto 101 is a series contributing to the Learn-to-earn program of EZ Wallet. The series will have two primary contributor sources, the first is from the EZ Wallet team, and the second is from the community members of EZ Wallet. To better understand how to get involved, join EZ Wallet on discord to find out more.
About the author:
Content Creator, Graphic Designer, Artist,… What else this man can’t do!
Sage is one of the first Original members of the EZ Wallet community. Contributing to the community with his amazing creativity, this man sure does his best to bring EZ Wallet to a whole new level.
Make sure to follow Sage for more amazing content: Twitter
About EZ Wallet:
EZ Wallet is on the journey to make crypto more accessible and convenient for everyone, from the crypto newbie to the seasoned crypto vet. The EZ Wallet team is a diverse and dynamic team aiming to create a non-custodial wallet that makes everyone’s journey into the crypto world easier, with a more friendly interface that simplifies the Crypto process while simultaneously pushing the boundaries of what advanced features a digital wallet can provide.
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