Anyone who wants to interact with cryptocurrencies will need some sort of wallet to manage and store digital assets.
Anyone who wants to interact with cryptocurrencies will need some sort of wallet to manage and store digital assets. Just like a wallet where you keep your money and cards, cryptocurrency wallets can vary greatly in their appearance, functionality, and level of security.
All wallets can be divided into two categories: custodial and non-custodial:
- Custodial wallets are wallets that are held by a third party. This could be an exchange like Binance or a digital asset platform like Nexo. Their advantage is that they are relatively easy to use, linked to many products and services, and support a large number of cryptocurrencies. They do have the serious disadvantage of not giving you access to your private keys. This means that if the platform goes offline for service or is hacked, your assets will become inaccessible, temporarily or permanently.
- Non-custodial wallets are wallets that do not rely on a centralized third party to store or protect your private keys. As a result, owners of non-custodial wallets are always in full control of their assets and responsible for keeping them safe. This includes many mobile and software wallets as well as hardware wallets. They have the advantage of being accessible at all times, and many of them support multiple assets and blockchains, but can be more complex to use and therefore require more deliberate handling. Some of the most popular non-custodial wallets were discussed in this link.
Tip for beginners: every wallet has its pros and cons. We recommend putting security first, especially if you’re going to keep a large sum of money. Then choosing a cold wallet over a hot one is a good place to start.
