Non-custodial wallets provide full control over your crypto assets, eliminating third-party management and increasing the security of users’ assets. How do non-custodial wallets differ from custodial wallets?
What is a Non-Custodial Wallet?
A non-custodial wallet is a type of hot wallet that stores crypto assets via the internet, allowing users to have complete control over their cryptocurrencies. In other words, no one (not even the wallet developers) has the right to freeze, access, or transact the assets in the wallet except the user themselves.
Similar to other types of hot wallets, a non-custodial wallet is essentially just software that helps create and store the user’s private keys and public keys on the blockchain while providing them with an interface to easily interact with crypto assets stored on-chain
When creating a non-custodial wallet, users are provided with a public key and a private key/seed phrase. Here’s what they are:
- Public key: A string of characters in the format of letters and numbers, used to receive assets into the wallet and can be shared publicly. The public key is often shortened to a wallet address.
- Private key: A string of characters in the format of letters and numbers, used to access the wallet, make transactions to send assets from the wallet, and must be kept secret.
- Seed phrase (Mnemonic Seed): Contains 12 to 24 random English keywords, used to access multiple wallets at once and must be kept secret.
The private key and seed phrase are encrypted and stored in a secure area on the mobile device that only the user can access. This is extremely important informationdirectly related to assets, so users are required to save their private key and passphrase in a safe place to back up or restore the wallet in case it is lost or hacked.
Learn more: Tips for securely storing private keys & seed phrases
Why Use a Non-Custodial Wallet?
Users Have Full Control Over Assets:
- When using a non-custodial wallet, users are not dependent on any third party, thus eliminating the worry of losing money when an exchange collapses or is attacked.
- In addition, users can also transfer assets to exchanges to trade, or receive coins/tokens to their non-custodial wallet anytime, anywhere, quickly and safely.
Ability to Secure Assets and Personal Information:
- Unless the user exposes their private key/seed phrase or the device is infected with malware, the risk of losing assets stored in a non-custodial wallet is very low.
- Besides, users do not need to perform KYC (identity verification) or provide personal information to any organization. Everything is transacted based on the wallet address.
Instant Experience: Thanks to not requiring third-party authentication, all transactions on a non-custodial wallet are carried out almost immediately when the user confirms the transaction.
Comparing Non-Custodial Wallets and Custodial Wallets
A custodial wallet is a type of hot wallet where the user’s private key is controlled by a third party (the wallet developer). They have full control over the user’s assets, are responsible for managing the wallet keys, and signing transactions when the wallet owner makes a transaction. Users must completely trust this third party.
The differences between non-custodial and custodial wallets are based on the following factors:
- The entity managing and controlling the private key.
- Transaction completion time.
- Security capabilities.
- Wallet accessibility.
- Ability to recover the wallet when the private key is lost.
Top Popular Non-Custodial Wallets
MetaMask Wallet
MetaMask wallet is a non-custodial wallet developed on the Ethereum blockchain platform, allowing users to connect to almost all dApps in the market. The wallet also has a feature that supports users in adding blockchain networks and tokens to the wallet for easy storage and asset management.
MetaMask wallet has a user-friendly interface and is easy to use. In addition, there is also a swap feature that allows for quick token transactions; however, the swap fees are relatively high, and it also does not automatically update data about the user’s assets, requiring manual integration.
Trust Wallet
Trust Wallet is a non-custodial wallet developed by the Binance exchange, with multi-chain support allowing users to store tokens and NFTs on various chains. Trust Wallet also integrates staking features to earn profits, in addition to connecting with many dApps such as PancakeSwap, 1inch, Aave, OpenSea, etc., for a DeFi experience.
Moreover, Trust Wallet also has a simple interface that is user-friendly and easy to use.
Ramper Wallet
Ramper Wallet is a non-custodial wallet that offers a social login solution, allowing users to create and access their wallets using social media logins such as Facebook, Gmail, Apple ID, etc. This makes accessing the wallet more convenient while ensuring its security.
Ramper Wallet is suitable for users who are familiar with Web2, are new to Web3, and have difficulty creating and using non-custodial wallets. Instead of having to use a private key, Ramper uses more familiar “materials” for users, such as personal Facebook accounts, email, iCloud, etc., to access their crypto wallets, helping to bridge the gap between Web2 and Web3 for users.
It can be said that new users can use Ramper Wallet to gradually familiarize themselves with Web3. After getting used to the Web3 wallet, gaining more knowledge about the market, and being aware of security risks, users can restore their wallet from Ramper to another wallet like Coin98 Super Wallet to enhance their Web3 experience with a variety of features and applications integrated on multiple chains (multi-chain).
Note: Whether it’s Ramper or Coin98 Super Wallet, they essentially still have public and private key pairs. Users must store their private keys carefully to be able to recover their wallets in case their phone or social media accounts are hacked.
Learn more: Guide to creating a Ramper Wallet.
Frequently Asked Questions about Non-Custodial Wallets
What is a non-custodial wallet used for?
Non-custodial wallets are used to store cryptocurrencies on different blockchains. Depending on the wallet application, users can directly trade, buy and sell coins/tokens, and manage different assets.
In addition, non-custodial wallets also help users access and use DeFi services and features of dApps such as lending, borrowing, farming, etc., which custodial wallets are still quite limited in.
What types of crypto assets can be stored in a non-custodial wallet?
Depending on each non-custodial wallet, it will support different blockchains, such as Bitcoin (BTC), Ethereum (ETH), Viction (VIC), BNB Chain (BNB), TRON (TRX), Solana (SOL), etc.
While custodial wallets only store coins listed on the exchange, with non-custodial wallets, users can store any coin/token as long as they belong to the token standard of the blockchain supported on the wallet.
Some popular token standards include: ERC-20 of the Ethereum blockchain, BEP-20 of the BNB Chain blockchain, SPL of the Solana blockchain, VRC25 of the Viction blockchain, etc.
Does it cost money to use a non-custodial wallet?
Non-custodial wallets do not charge a fee when users store cryptocurrencies. However, when making a transaction to transfer coins from the wallet, users will incur a fee for miners or validators to confirm the transaction on the blockchain, also known as a gas fee. Gas fees will be paid in the native token of the blockchain, for example, ETH on Ethereum, BNB on BNB Chain, VIC on Viction, SOL on Solana, etc.
Note: Gas fees are used to pay miners and validators on the blockchain, not to the wallet developers or providers.
Can a non-custodial wallet be linked to an exchange?
Non-custodial wallets are not directly linked to centralized exchanges (CEXs) such as Binance, OKX, KuCoin, Bybit, etc. To buy and sell crypto, users need to transfer the amount of coins/tokens in their non-custodial wallet to the CEX.
Conversely, non-custodial wallets can be directly linked to decentralized exchanges (DEXs) like Uniswap, Sushiswap, 1Inch, etc. Users need to link their non-custodial wallet to the DEX to use and interact with the features on the exchange.
Is a project that integrates with a wallet a partner of the non-custodial wallet?
There are currently some cases where users evaluate and invest in a project based on their partners. However, not doing thorough research and misunderstanding information can lead to incorrect decisions. The example below will help users visualize this better.
