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What is a custodial wallet?
What is a custodial wallet?

Definition of custodial wallet

Alex avatar
Written by Alex
Updated over a week ago

A custodial wallet is a type of digital wallet where a third party, such as an exchange or a service provider, has control or custody over the private keys that access the cryptocurrency stored in that wallet.

In a custodial wallet:

  1. Control: The service provider manages the private keys, which are needed to access and control the stored cryptocurrencies.

  2. Accessibility: Users rely on the service provider's platform or interface to manage and access their funds.

  3. Security and Risks: While custodial wallets often provide user-friendly interfaces and additional security measures, users are essentially entrusting their funds to the security practices and reliability of the third-party service.

Custodial wallets are convenient for users who prioritize ease of use and are willing to trust a third party with the security of their assets. However, they involve a level of risk, as users do not have direct control over their private keys, which are crucial for ownership and security in the crypto space.

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