What's a self-custodial wallet? | Learn all about Bitcoin, crypto, and DeFi | Get Started with Bitcoin.com (2024)

FAQs

What's a self-custodial wallet? | Learn all about Bitcoin, crypto, and DeFi | Get Started with Bitcoin.com? ›

Self-custodial wallets give full control over crypto to users. Either a private key or a part of the private key is stored on the user's device which makes users full custodians of their wallets. Custodial wallets store wallet private keys on third-party servers, users don't have access to them.

When a crypto user takes sole possession of their wallet's private keys instead of trusting them to an exchange, they are self-custodying their assets. Security conscious crypto users typically prefer self-custody because they can maintain total control over their funds, requiring no third-party involvement.

At its core, a DeFi wallet is a digital tool that allows you to store, send, and receive decentralized tokens and interact with DeFi platforms. Unlike traditional wallets, which store fiat currencies, a DeFi wallet stores cryptographic keys—both private and public keys.

Risk Of Theft: When using custodial wallets, your assets are being held by another person/entity, which means there is a risk of them just taking the funds. Loss Of Control: When you use a custodial wallet, you are giving up control of your funds to a third party.

Crypto Wallets can also partner with DeFi protocols to offer interest-bearing accounts, earning a commission from these partnerships. Many crypto wallets are now offering premium features and services that require users to pay a subscription fee.

Definition. Short for decentralized finance, DeFi is an umbrella term for peer-to-peer financial services on public blockchains, primarily Ethereum.

Initiate withdrawal: Paste your deposit address into your DeFi wallet, preview the transaction, check fees, and confirm the withdrawal. Swap crypto for fiat: Once the funds land on your chosen platform, sell your crypto for your desired currency, withdraw to a bank account, or use the platform's spending tools.

While DeFi protocols may not have custody of your funds, they can transact on your behalf if certain conditions are met. A hacker can exploit this by artificially meeting the conditions and then being able to access your funds.

A DeFi wallet scam is a fraudulent scheme designed to trick users into giving up control of their crypto assets or revealing sensitive information, such as private keys or wallet credentials.

Is cash App a custodial wallet? ›

Cash App and Coinbase both have custodial wallets where you can send and receive crypto (only Bitcoin, in Cash App's case) using your wallet address.

Some of the popular examples of best Custodial wallets are: Free Wallet, Binance, BitMex, Bitgo, Blockchain.com. Some examples of best Non-custodial wallet 2021 are: Electrum, Exodus, Ledger Nano X, Trezor One, Zengo, Wasabi, among others.

The Blockchain.com DeFi Wallet is a web-based cryptocurrency wallet that allows users all over the world to store and transact with cryptocurrencies for free.

Coinbase Wallet is a self-custody wallet that gives you complete control of your crypto. This means that the private keys (that represent ownership of the cryptocurrency) for your Wallet are stored directly on your mobile device and not with a centralized exchange like Coinbase.com.

To safely self-custody your crypto, you can use a hardware wallet like Ledger Nano X. Unlike storing your cryptocurrency on custodial exchange wallets, a hardware wallet keeps your private keys and assets offline, making them less vulnerable to hacks and unauthorized access.

Your onchain passport. Kraken Wallet is a powerful, self-custody wallet built to connect you to the decentralized web — safely and securely.