Unless you live in a cave or under a rock, you've probably heard of cryptocurrencies or, in the worst-case situation, bitcoin. One of the most essential requirements to get started with cryptocurrency is a crypto wallet, similar to the physical wallet you use to put in your bill notes (domestic currency).
Aside from the crypto wallet being similar to your physical wallet where you store your money, it can also be compared to your bank account.
Of course, you've heard the expression "send me your wallet address," which is equivalent to sending your bank account number to someone to receive money, which without one, you can't send or receive money, pay bills, or link a credit card. So, in the crypto world, a crypto wallet is the equivalent of a bank account.
What is a Crypto Wallet?
A crypto wallet is a software or hardware that employs blockchain technology to administer, transmit, and manage cryptocurrency securely. Unlike your traditional wallet, which stores bill notes, crypto wallets only store digital assets - crypto assets and non-fungible tokens (NFTs).
The crypto wallet does not hold the crypto assets actually, but rather the private keys to the crypto assets that exist on a blockchain network. As a result, consider a crypto wallet to be the key holder for your crypto assets held on blockchain networks.
There are two distinct categories of crypto wallets: centralized and decentralized wallets.
A centralized wallet functions like a traditional bank owned and managed by a third party. Therefore, centralized wallets are also called custodial wallets, where your private keys are in the custody of the wallet authority. A custodial wallet maintains all your crypto assets and keeps them safe in its custody while asking for and keeping your information through KYC verification.
As its name implies, a custodial wallet is a third-party application that manages your cryptocurrency private keys for you. Hence, you needn't remember your seed phrases; a third party does that for you. This third-party (usually a centralized exchange) maintains all your crypto assets in custody. In addition to your keys and seeds, custodial wallets keep other information records, like your name and KYC document.
A custodial wallet is similar to the traditional banking system, where you deposit your funds and trust their safety in the hands of your financial institution.
The most significant benefit of custodial wallets is the ease of usage. They don't require sophisticated technical knowledge of cryptocurrency; as a complete beginner, you only need to provide your email and password to create an account and log in to the custodial wallet. You can reset your account password if you forget it.
Additionally, these platforms will present you with some recommended security steps (like a 2-Factor Authentication) to safeguard your assets. The coolest part is that you can't technically lose access to your wallet; you can't lose them because you don't have private keys.
Advantages of Custodial Wallets
While a custodial wallet gives users less control over their assets, many prefer it because it requires less responsibility and is usually more convenient. Here are other advantages of the custodial wallet.
- You cannot lose your private keys: You are not in control of your keys when using a custodial wallet. Hence, safeguarding the private key or mnemonic is the responsibility of the third-party platform. As a result, you can't lose your keys since all you have to do is log in to your account.
- Easy access to fiat currency: Since most custodial wallets are managed by a Centralized exchange (CEXs), it is easy and extremely cheap to trade crypto assets for fiat currency and get money in your bank account.
- Backup option: Another significant benefit of using custodial wallets is that it allows you to keep your money safe. The wallets used here are frequently administered by a central authority that assists or offers a helpful service to the possibility of wallet backup. This comes in handy when you need to pause or cancel a transaction and when you need to restore from a prior version.
Disadvantages of A Custodial wallet
- Your fund is in the hands of a third party: Since a third party is in charge of your account, they have complete authority over your funds and can freeze them if they so like.
There are several centralized wallets available, but Cwallet stands out because, unlike other wallets that require mandatory KYC verification, Cwallet just requires you to add your mobile phone or a third-party platform, such as Twitter, Telegram, Discord, or Reddit, for sign up and offers the top features of the best crypto wallet.
A decentralized wallet or non-custodial wallet leaves the responsibility of safeguarding your private keys in your hands. As a result, you are your own bank, doing transactions without the involvement of a third party. You set your own rules and manage your crypto assets in any way you see fit. Since the non-custodial wallet is not under anyone's control, you are entirely responsible for keeping your keys safe and accessible. You make your own rules and manage your money the way you want. Non-custodial wallets are often referred to as decentralized wallets.
However, there are several precautions you must take while selecting a decentralized wallet. One of these is securely storing the mnemonic phrase or recovery seed, which contains 12 to 24 random characters and words and allows you to generate your public and private keys. If you use a non-custodial wallet, you must keep the mnemonic phrase safe from unauthorized access, as you will lose your crypto assets if you lose the mnemonic phrase. Remember that anyone who knows your seed phrase can access your crypto wallet.
Advantages of Non-custodial Wallets
- You have complete control of your assets anytime, anywhere, without interruption.
- You do not need to give up any personal information to access or move your funds.
- The permission of a third party is not required to transfer, store, and trade assets.
Disadvantages of Non-custodial Wallets
- Since your cryptocurrency must first be transferred to an exchange, trading it will be more challenging and expensive.
- You will almost always be presented with increasingly more challenging-to-understand user interfaces.
- Being in control of your security entails a significant responsibility, and you may be easily susceptible to hacks.
- Any error on your part could expose you to theft or cause you to accidentally lose your assets.
With Cwallet, you may enjoy a user-friendly non-custodial wallet experience with access to beautiful and easy-to-understand asset overviews while taking control of your asset without interruption.
Which is Safer? Custodial or Non-Custodial?
In the end, the safer type of wallet is relative!
For experienced crypto users who do not want anyone to control their funds, a non-custodial wallet is ideal. Since it is a decentralized wallet, all users have authority, and each person holds their funds.
On the other hand, if you are new to cryptocurrency and don't want to be solely responsible for your account's security, or if you prioritize cheap transactions and backup options, then a custodial wallet is something you should consider.
Or you can choose Cwallet! A one-of-a-kind, combined custodial & non-custodial crypto wallet, integrated on-chain & off-chain, that provides you security, convenience, and flexibility to manage and trade 800+ crypto assets in one place.
Regardless of your wallet option, make sure to follow the best security standards.
What to Consider When Choosing A Crypto Wallet?
Regardless of whatever type of crypto wallet you like, there are some factors to consider before selecting one, particularly the wallet's features and the fees associated with using it. Among these features are the following:
Accept Multiple Cryptocurrencies
One of the most essential features to look for in a cryptocurrency wallet is the ability to accept as many cryptocurrencies as possible. Multi-Crypto transactions mean that the wallet supports all major cryptocurrencies. Cwallet allows you to easily access cryptocurrencies. You can send, receive, swap, and manage over 800 tokens over 50 networks at any time and from any location.
The crypto wallet must support cross-chain interoperability and be compatible with cryptocurrencies on different blockchains so that users can transfer cryptocurrency from one blockchain to another.
Given that the cryptocurrency wallet is software, anything can go wrong. It could be the result of human error or a system failure. As a result, ensuring that the information in the wallet is secure with efficient and dependable backup facilities is crucial. Cwallet secures your crypto assets with Multi-Party Cloud Computing (MPCC) technology - keyless cryptographic custody.
When choosing a crypto wallet while considering profitability, it is important to look out for the associated fees with the wallet. Some of the most common fees are listed below.
Network fees are unavoidable; they are paid to network validators to confirm the legitimacy of your transaction. Network fees vary between blockchain networks; For Example, network fees on Ethereum are more expensive than other blockchains.
Swapping is exchanging one cryptocurrency for another without carrying out a trade on the "spot market." The wallet provider usually handles this; thus, they may charge a fee to swap your assets.
Service fees are charges from some crypto wallet service providers who request some fees before allowing you to use their services. These fees can be one-time or a certain percentage of your transaction.
Therefore, considering all of these features and fees will help you choose the best crypto wallet. However, if you want to carry out FREE swap transactions within your crypto wallet without incurring any fees, Cwallet is your best bet!
You can maximize your profits on your transactions with Cwallet because there are no internal swap fees, deposit or withdrawal fees, or other hidden charges.
"What is Crypto Wallet?" is one of the most crucial things to ask while starting your crypto journey since it teaches you how cryptocurrency is securely stored. The best crypto wallet allows you to access your crypto assets while also allowing you to manage all of your digital assets – cryptocurrency and NFTs – in one place, send and receive digital assets from anywhere in the world without restrictions, and use your digital assets for daily activities such as online shopping, mobile top up, and other online payments.
Furthermore, when selecting the best crypto wallet for you, make sure it is a reputable wallet with the top features of the best crypto wallet. Cwallet is an excellent starting point for your crypto journey because it combines the features of both custodial and non-custodial wallets while charging no transaction fees.
Remember that the crypto wallet you choose is critical to the security of your digital assets. So take your time and find the one that works best for you.