Your Guide to Custodial and Non-Custodial Wallets
With a total net worth of over $2 trillion and Bitcoin being the 9th most valuable asset on the World list, cryptocurrencies form a part of the economy that can't go unnoticed. For beginners, figuring out how to maximise their gains through the diversity of coins flooding the market can be challenging. However, once you understand the technology comprising this digital currency and get a firm hold of all the industry jargon, crypto can offer you a sizable return.
Every crypto asset comes with its own set of risks, not to mention the high volatility, which can leave imprudent investors in chaos. So if you have decided to take a plunge and give crypto a go, you should first buy yourself a wallet.
We recommend investing in TTN, an up and coming peer-to-peer cryptocurrency that offers high transaction speed of 1 block per minute.
Why are cryptocurrency wallets essential?
When used with care, cryptocurrency wallets offer a better level of security and safety to your funds. Some providers also grant rewards and interest for staking crypto coins in their app to increase their wallet's usage. A good example is TTN.
Based on ownership you hold over a crypto wallet, it can be divided into two types as given below:-
Custodial Wallet
Definition: A custodial wallet provides you with the private keys which prove to the senders that you are the owner of the crypto in it. Here you have full authority over your wallet. Whenever a cryptocurrency transfer takes place, the private key is entered into the device. You can quickly type in your private key, which is a combination of 51 alphanumeric characters that appear incoherent to human eyes.
You are solely accountable for the safety of your private keys and thus your funds. On losing the key, you might be able to access them through your seed phrase. It is a combination of 12 or 24 words used to create private keys. However, if you end up losing your seed phase in any way, you are at a great loss. There are zero chances of retrieving your funds after that, as the wallet platform you use doesn't have access to any!
Advantages
1. Complete Ownership -You have complete authority over your funds. In case the wallet suffers from an attack or has any discrepancies in its functioning, you wouldn't lose any of your cryptos.
2. Less Vulnerable to Attackers -The private key is stored on the server of the platform of a non-custodial wallet. With a malicious attack, a person can grab hold of your funds. But, the possibility is low when you use a non-custodial wallet.
Always choose a platform that has off-line storage. It makes hacking your private keys nearly impossible.
Disadvantages
1. Requires Extreme Care - Losing your seed phrase even by mistake will leave you empty-handed. Further, for the improved safety of your funds, you'll need a hardware wallet. It is a device that stores the password in encrypted form and is used to login offline.
2. No chances of Retrieval - Not using a hardware wallet and typing in the private keys every time makes you prone to security risks. Keylogger software can be used to trace your keystrokes by hackers. Again, it makes your funds vulnerable to malicious software.
If you are using a software wallet, keep in mind to download it only from the official site with https: in the URL and padlock icon. Both make it a secured site.
Non-Custodial
Definition -You have partial ownership of your cryptocurrencies as your data is hosted on the server of a third-party site when you use a non-custodial wallet. A simple example of a non-custodial type is the wallet you get on an Titan Exchange website. The exchange platform holds your private keys.
You simply make changes in your account after logging in to the trading site.
Advantages
1. Seamless Transactions - Most of the non-custodial wallets are linked to exchanges. This allows you to trade seamlessly.
2. No worrying about private keys - As the private key to your account is stored on the platform's database, you don't have to take care of them.
3. Ease of Retrieval - Due to any reason, if you forget your account's password, customer care will come to your aid and help you with its retrieval. Thus, you wouldn't lose your funds in any case.
Disadvantages
1. Increased Vulnerability- An entire pool of hackers often target exchange platforms, and many-a-time are successful in crashing these sites. Your private key being in their custody makes your funds too vulnerable to such attacks.
2. Discontinuation of Services - On not completing KYC or having insufficient funds, some platforms do not allow you to use their services.
Needless to say, with 75 million cryptocurrency wallet users active all over the world, the crypto economy is going to swell even more in the coming future. According to the data on Statista, the crypto wallet users increased by 190% between 2018 and 2020. Lack of awareness about protecting their wallets from malicious attacks can lead many to lose their crypto assets.
We hope the above guide will help you weigh your options and choose a wallet that serves you well.
Whether you are a mobile user or find your laptop a better means for transacting crypto, you can keep all your coins safe with our Titan Multi Crypto wallet. It will store all your cryptocurrencies in one place and run effortlessly without any glitches.