By There are many types of wallets that token holders can use to store cryptocurrencies. They can be divided into two broad categories: custodial and non-custodial. A custodial wallet is a service that owns the wallet’s private key and stores the owner’s assets. When using a non-custodial wallet, only its owner has full control over assets.
Both solutions have their pros and cons. But in order to safely store cryptocurrency and be able to exchange ETH to BNT online, you need to make the right choice. In this review, we will tell you more about the non-custodial service and its pros and cons. So take enough time to study the material.
What Is a Non-Custodial Service?
Non-custodial services are completely autonomous. This means that no one except the users themselves can manage the balance. In fact, the wallet itself acts as a bank and is controlled by a program code, which prevents any outside interference. Access to such services requires a private key and a seed phrase, which the user must securely store by making several copies. It is possible to store the seed phrase using special devices, including BillFodl and Cryptosteel.
Storing cryptocurrencies in a non-custodial wallet is entirely the users’ responsibility. However, if you lose the private keys, passwords, and a seed phrase of the service, the funds may be lost forever, and the online crypto exchange will not help.
4 Main Varieties of Non-Custodial Wallets
There are several types of non-custodial services:
- Software wallets – computer applications that are downloaded directly to the user’s device (computer, phone, laptop, etc.);
- Mobile wallets are usually stored on mobile devices. They are used both to store funds and pay for goods and services in stores;
- Hardware wallets. These are computer devices (SIM cards, USB, hard drives, etc.) that can autonomously generate secret keys and digital signatures of transactions. These wallets support different cryptocurrencies. They are safe and compatible with a wide range of devices;
- Paper wallets are another way to store cryptocurrencies. In this case, private keys are fixed on paper. Then, if a transaction is required, the user integrates the key into their online wallet. Today, this type of wallet is used less and less. This is due to the fact that they are easily destroyed and, therefore, are not very reliable. It is better to replace them with other more reliable types described above.
Pros and Cons of Non-Custodial Services
Among the advantages of non-custodial services, the following can be noted:
- Full access to funds;
- Ability to work offline;
- Safe storage of cryptocurrency;
- No transaction delays.
As for the disadvantages of using such services, it should be noted that sole control imposes its own limitations. For example, if you lose your seed phrase, you risk losing your funds forever. Therefore, you should always store keys and passwords securely.
This leads to a second key shortcoming. If you lose access to funds, restoring them will not be possible. Neither banks nor crypto exchanges will be able to help in this case.
And the third disadvantage that you should pay attention to is the charging of a commission for each transaction. A custodial service may allow some transactions to be carried out for free. A non-custodial service, on the other hand, requires a commission for any transactions.
So, non-custodial services have many benefits, the main of which is the provision of reliable and confidential cryptocurrency storage. As a result, they are very popular today. However, if you also want to ensure the secure storage of your coins, mastering the use of such a service is highly desirable.
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