Custodial and Non-Custodial Wallets

TL;DR

This paper compares custodial and non-custodial cryptocurrency wallets, highlighting their differences, features, and associated risks, to inform users about secure digital asset management options.

Contribution

It provides a detailed characterization of custodial versus non-custodial wallets, emphasizing their key features and risk profiles.

Findings

Non-custodial wallets give users full control over private keys.

Custodial wallets involve third-party management, reducing user responsibility.

Risks differ significantly between the two wallet types.

Abstract

Non-custodial wallets are a type of cryptocurrency wallet wherein the owner has full control over the private keys and is solely responsible for managing and securing the digital assets that it contains. Unlike custodial wallets, which are managed by third parties, such as exchanges, non-custodial wallets ensure that funds are controlled exclusively by the end user. We characterise the difference between custodial and non-custodial wallets and examine their key features and related risks.