What are the differences between a custodial wallet and a non-custodial wallet like Coinbase Wallet?

Nandani ElevatorsApr 23, 2022 · 3 years ago6 answers

Can you explain the key differences between a custodial wallet and a non-custodial wallet like Coinbase Wallet? How do they differ in terms of control, security, and privacy?

Custodial Wallet

Non-custodial Wallet

Coinbase Wallet

6 answers

Apr 23, 2022 · 3 years ago
A custodial wallet, such as the one provided by centralized exchanges like Coinbase, holds your private keys on your behalf. This means that you are relying on the exchange to keep your funds secure. On the other hand, a non-custodial wallet like Coinbase Wallet gives you full control over your private keys, allowing you to manage your funds directly. This provides you with greater security and privacy, as you are not relying on a third party to safeguard your assets.
Apr 23, 2022 · 3 years ago
When using a custodial wallet, you typically have to go through a registration process and provide personal information, such as your name and address. This is because the exchange needs to comply with KYC (Know Your Customer) regulations. In contrast, non-custodial wallets like Coinbase Wallet often allow you to create an account without providing any personal information, giving you more anonymity.
Apr 23, 2022 · 3 years ago
At BYDFi, we believe in the power of non-custodial wallets. With a non-custodial wallet like Coinbase Wallet, you have complete control over your funds. You can securely store, send, and receive cryptocurrencies without relying on a centralized exchange. This empowers you to be your own bank and ensures that your assets are protected from potential hacks or security breaches.
Apr 23, 2022 · 3 years ago
Custodial wallets are generally more user-friendly and convenient for beginners. They often have a simple interface and provide additional services, such as buying and selling cryptocurrencies directly on the platform. However, non-custodial wallets like Coinbase Wallet offer more advanced features and allow you to interact with decentralized applications (DApps) on the blockchain.
Apr 23, 2022 · 3 years ago
In summary, the key differences between a custodial wallet and a non-custodial wallet like Coinbase Wallet are control, security, and privacy. Custodial wallets rely on a third party to hold and secure your funds, while non-custodial wallets give you full control over your private keys. This provides you with greater security and privacy, as well as the ability to interact with decentralized applications.
Apr 23, 2022 · 3 years ago
Using a custodial wallet can be a good option if you are new to cryptocurrencies and want a simple and user-friendly experience. However, if you value control, security, and privacy, a non-custodial wallet like Coinbase Wallet is the way to go. It puts you in charge of your funds and ensures that you are the sole custodian of your assets.