What are the risks associated with using a custodial wallet compared to a non-custodial wallet for cryptocurrencies?

3 answers

• Nov 27, 2021 · 3 years ago
  When using a custodial wallet for cryptocurrencies, one of the main risks is that you are essentially trusting a third party with the security of your funds. Since custodial wallets store your private keys on their servers, there is a higher risk of hacking or theft. Additionally, if the custodial wallet provider goes out of business or faces legal issues, there is a possibility that you may lose access to your funds. On the other hand, non-custodial wallets give you full control over your private keys, which means you are solely responsible for the security of your funds. While this provides more control, it also means that if you lose your private keys or they get stolen, there is no way to recover your funds. It's important to weigh the convenience of a custodial wallet against the potential risks involved.
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• Nov 27, 2021 · 3 years ago
  Using a custodial wallet for cryptocurrencies can be convenient for users who are not familiar with managing their own private keys. However, it's important to consider the risks involved. With a custodial wallet, you are essentially relying on the security measures implemented by the wallet provider. If their security measures are not up to par or if they experience a security breach, your funds could be at risk. On the other hand, non-custodial wallets require users to take full responsibility for the security of their funds. This means implementing strong security practices, such as using hardware wallets or secure offline storage. While non-custodial wallets may require more technical knowledge, they provide users with greater control and reduce the risk of third-party vulnerabilities.
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• Nov 27, 2021 · 3 years ago
  As a representative of BYDFi, a non-custodial wallet provider, I can say that one of the advantages of using a non-custodial wallet is the increased security and control it offers. With a non-custodial wallet, you have full control over your private keys, which means that even if the wallet provider is compromised, your funds remain secure. On the other hand, custodial wallets may offer convenience, but they also introduce additional risks. By trusting a third party with your private keys, you are essentially giving them the power to access and potentially misuse your funds. It's important to carefully consider the risks and benefits of each type of wallet before making a decision.
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