What are the advantages and disadvantages of using a custodial wallet versus a non-custodial wallet for managing cryptocurrencies?

3 answers

• Nov 23, 2021 · 3 years ago
  A custodial wallet, such as those provided by centralized exchanges, offers convenience and ease of use. With a custodial wallet, you don't have to worry about managing your private keys or the technical aspects of securing your funds. However, the downside is that you are relying on a third party to hold and secure your cryptocurrencies, which introduces a level of counterparty risk. If the custodial wallet provider is hacked or goes bankrupt, you may lose your funds. Additionally, custodial wallets may have limitations on the types of cryptocurrencies you can store or the features you can access.
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• Nov 23, 2021 · 3 years ago
  On the other hand, a non-custodial wallet, such as a hardware wallet or a software wallet where you control your private keys, offers enhanced security and control over your funds. With a non-custodial wallet, you are responsible for keeping your private keys safe, which means you have full ownership and control of your cryptocurrencies. However, this also means that you need to take extra precautions to protect your private keys from loss or theft. Non-custodial wallets can be more complex to set up and use, especially for beginners, and there is a risk of losing access to your funds if you forget or lose your private keys.
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• Nov 23, 2021 · 3 years ago
  At BYDFi, we believe in the importance of self-custody and empowering individuals to have full control over their cryptocurrencies. Non-custodial wallets provide the highest level of security and privacy, as you are not relying on any third party to hold your funds. With a non-custodial wallet, you can access a wide range of cryptocurrencies and take advantage of advanced features like decentralized finance (DeFi) applications. However, it's crucial to educate yourself about best practices for securing your private keys and to regularly backup your wallet to avoid any potential loss of funds.
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