A custodial wallet is a type of wallet that holds and secures users’ private keys on their behalf. This means that the wallet provider has control over the funds stored in the wallet, rather than the individual user. This setup is often used by centralized exchanges and online platforms that offer cryptocurrency storage services to their customers.
Custodial wallets are typically more user-friendly and easier to use compared to non-custodial wallets, as the responsibility of managing private keys and security measures lies with the wallet provider. However, this convenience comes at the cost of reduced control and ownership of funds for the user.
While custodial wallets can offer added security features and protection against hacks or theft, users must trust the wallet provider to safeguard their assets. In the event of a security breach or if the wallet provider goes out of business, users may risk losing access to their funds. Therefore, it is important for individuals to carefully research and choose a reputable custodial wallet provider.
