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What is a cryptocurrency wallet?
A cryptocurrency wallet is a tool for interacting with cryptocurrencies on the blockchain. With it, you can create and manage addresses for storing and transferring digital assets. In fact, this is an application with an interface and various functions for managing the address and the crypto assets stored in it.
What is a custodial crypto wallet and when is it needed?
A custodial wallet is an application for storing and transferring cryptocurrencies, the peculiarity of which is that its operator (custodian) manages users' addresses or has access to their private keys. In addition, custodian customers are required to complete the identity verification (KYC) process. Try it here
A built-in custodial wallet is available for centralized crypto exchanges. Although each client has a separate account and balance, all funds are stored in a small number of addresses managed by the exchange. This simplifies the work with trading instruments and allows you not to pay for transactions within the platform.
Individual clients rarely encounter custodial wallets outside of dedicated applications. However, such solutions are often used by institutional investors - companies that operate with large amounts. They transfer cryptocurrencies to the custody of a professional company with an increased level of security and other services, such as insurance.
What is a non-custodial crypto wallet?
A non-custodial cryptocurrency wallet retains the creator of the address in full control of their funds, since it does not transfer their private keys to anyone. Such an application cannot freeze or manage user funds, but it is not responsible for their safety.
This is usually an application that can be downloaded to a PC, mobile device, or browser. Creating an address on the blockchain through a non-custodial application does not require KYC.
Popular non-custodial wallets are further secured by publishing their source code. This allows independent experts to verify that these applications for storing cryptocurrencies are really safe. Also, such projects are often supported by a whole community of programmers.