Familiar with different categories of crypto wallets, such as custodial and non-custodial wallets? Well if you are not yet, you should read this article. Today we will talk about custodian and non-custodian.
What is custodian and non custodian?
Custodian (custodial)
A custodian (custodial) wallet is defined as a wallet whose private keys are held by a third party. This means that a third party has full control over your funds, and you only need to grant permission to send or receive payments.
Non-custodian (Non-custodial)
A non-custodial wallet, often called a decentralized wallet, is basically a crypto wallet that entrusts users with control of their private keys. Only users have access to cryptocurrencies held in non-custodial wallets, providing users with favorable value in terms of ownership. In addition, non-custodial wallets also provide a guarantee for increasing the security of cryptocurrencies.
Custodial VS Non-Custodial
Custodian of private key: The number one factor to consider when comparing custodial versus non-custodial wallets is who holds the private keys. In the case of a custodial wallet, a third party manages the private keys. Whereas in the case of non-custodial wallets, all blockchain custody services are provided by the user. So if you want to introduce a wallet where users can be their own bank, consider creating a non-custodial blockchain wallet (also known as a self-custody wallet)
Transaction type: Another factor to consider during the comparison of custodial and non-custodial crypto wallets is the transaction type. Transactions are reflected on-chain in real-time in non-custodial. However, this is not the case with custodial wallets.
Security: In the case of hosted online crypto wallets, all sensitive user data is stored in hot and cold storage, which is frequently compromised by data intruders. Because of this, the level of security in custody is low unless the authority implements strong security measures . However, in the case of the non-custodial crypto wallet comparison, the entire information remains in the hands of the user. This reduces the risk of data theft unless the user shares details with someone, or their device is stolen.
Backup and recovery possibility: Self-hosted or non-custodial crypto wallets lag behind custodial wallets when it comes to backup and restore possibilities. The escrow wallet keeps the private key itself. So even if you lose access to your data, you can regain access by requesting a third party.
Offline accessibility: To access your funds and corresponding details, it is necessary to log into your escrow wallet and make a request to a centralized authority. This makes an internet connection a must. However, non-custodial wallets have no such requirement. In return , this means that non-custodial wallets are a better option for enjoying full blockchain development services in real-time.
Is Binance a non-custodial?
A custodial wallet, like Binance Custody, is a service that owns the private keys of your wallet and custodians your assets. Your regular Binance account is also a custodial wallet. In contrast, if you use a non-custodial wallet, you have complete control over your assets. MetaMask and Binance Chain Wallet are examples of non-custodial wallets. There are pros and cons to custodial and non-custodial wallets.
I hope now you will know what is custodian and non-custodian and whether is binance a non-custodial or not. Custody wallet or non-custodial wallet? Most crypto users use both, but it all depends on your needs. Remember, whether you are using a custodial or non-custodial wallet, you should always be careful and adopt best practices to improve the security of your funds.
