Top Reasons to Choose Non-Custodial Wallets

With the exchange of cryptocurrencies becoming more and more common, it is highly likely that you, too, are considering jumping into it. One of the crucial decisions you need to make is selecting a wallet that is suitable for you. This article discusses top crypto wallets and why you should consider a non-custodial wallet. So, to start off… 

What are crypto wallets?

Though the name “crypto wallets” suggests it's a place to store your cryptocurrencies, it is not entirely true. Instead, some best crypto wallets provide access to crypto-currencies, similar to a debit card. Crypto wallets store your public key and private key, and allow interaction with blockchain to make transactions. 

How do crypto wallets work?

A crypto wallet is a tool that can interact with a blockchain network. Wallets allow sending and receiving of crypto assets on any blockchain network by connecting to it. Public key and private key are the two important components of a crypto wallet. Public key is the address of your crypto wallet. It is what people use to send your digital currencies and assets. You can share this key with others. Likewise, if you need to send someone cryptocurrency, you need their public key. Public key is also known as an address when dealing with cryptocurrencies. 

The private key, on the other hand, is like a password. It is required to grant you access to your cryptocurrencies and crypto assets. While a public key is shared with others, a private key is meant to keep it secure, as the name suggests.

The primary usage of wallets is the same; however, depending on who owns the private key, there are two types of crypto wallets; custodial and noncustodial. Cryptoexperts always suggest you use the latter, so let’s see what it is and why they suggest it. 

What are non custodial wallets?

Crypto wallets that let you control your crypto assets completely by providing control of your own private key to you are known as non custodial wallets. If you use non custodial wallets you will be able to own a hundred percent of your own cryptocurrencies and NFTs and other crypto assets against your private key.

Non custodial wallets do not involve any custodial party or a significant party acting as an intermediary when sending or receiving cryptocurrencies. It eliminates the risk of trusting a central authority with your crypto assets. 

How are non custodial wallets different from custodial wallets?

The most significant difference between custodial and non-custodial wallets is based on who owns the private key. In the case of custodial wallets, as the name suggests, a third party manages the private key, whereas in noncustodial wallets, all custodian services reside with the user. 

Moreover, transactions via top non custodial wallets are reflected on the real-time blockchain one is connected to, whereas this is not the case in custodial wallets. 

Additionally, the security level of custodial wallets is lower than that of noncustodial wallets. In custodial wallets, the user data is stored in hot and cold storage, which makes it a target for hackers and data intruders. In noncustodial wallets, all the user-sensitive data remains with the user. This reduces the risk of breaching the user data. 

Another small but significant difference is that internet connectivity is a must for custodial crypto wallets as third parties need to be involved. Still, in the case of noncustodial wallets, it is not a requirement. 

The most significant disadvantage of going with Custodial cryptocurrency services is that you need more autonomy over your wallet. Additionally, you can only gain access to your crypto assets by proving your identity, which in turn, beats the feature of anonymity provided by blockchain networks. 

Reasons to choose non custodial wallets?

Now that we know what makes both the wallet types different and what are some disadvantages of custodial wallets let’s see the top reasons to choose noncustodial wallets.

Privacy

In noncustodial wallets, you do not need to sacrifice their privacy rights. Noncustodial wallets allow users to send and receive cryptocurrencies and other crypto assets and manage them without having to share their data.

Safety

The safety of private keys in noncustodial wallets depends on the owner of the private key. Since only the user has control over the private key, and a third party does not, thus making it less prone to hack attempts and data breaches and much safer. 

Additionally, by using hardware, the user can make their private key more secure while keeping control of their assets wholly and solely. 

Instant Withdrawals

Removing the third party from the process as an intermediary reduces the overhead of the whole process. This makes transactions, both sending and receiving, done using a noncustodial wallet much quicker and more efficient. 

Direct Access to Public Blockchain

Noncustodial wallets give users direct access to the public blockchain. This makes withdrawals instant, as discussed above and lets users interact with blockchain in other ways, for example, using smart contracts. 

Customized Fee

Due to the large number of transactions happening and waiting to become a part of the blockchain, how quickly a transaction is included depends on transaction fees. Noncustodial wallets allow users to customize their transaction fees to incentivize quicker inclusion of their transaction on the chain. So, if a user needs a transaction done quicker, they can include a higher transaction fee, and if a user is in no hurry, they can include a lower transaction fee.

Advanced Features

The best non custodial wallets also offer a range of advanced features. For example, users can access features such as crypto swapping and DeFI. Additionally, users can create multiple portfolios within the same wallet as well.

Examples of Non Custodial Wallets

Let’s look at the list of non custodial wallets.

Electrum: It is a popular noncustodial wallet with features ranging from multi-sig to cold storage. It utilizes servers that index Bitcoin.

Exodus: It is a noncustodial wallet that supports peer-to-peer crypto trading in decentralized exchanges (DEX)

Zeno: It is a noncustodial wallet without a private key. It creates two secret shares for the ZenGo server and user device. During a transaction, both of these interact with the initialized transaction, thus never revealing the secrets. 

Conclusion

As noncustodial wallets provide a lot more security and safety, along with quicker transactions, they are recommended by experts and are much more popular amongst crypto users. The complete ownership makes non custodial wallet the go-to for keeping it all decentralized. Crypto experts here at InvoBlox can help you develop a non custodial wallet with features best suited for you. Contact us today to discuss your crypto project requirement.