Updated: Sep 22, 2022
GameStop, the popular gaming and electronics retail company, recently unveiled the beta-version of their non-custodial crypto wallet. This is intended to help gamers buy and sell (send and receive) Dogecoin, crypto-assets, NFTs & more without ever having to leave their game.
A cryptocurrency wallet allows users to store any of their virtual digital assets, including crypto coins, tokens and NFTs. GameStop’s non-custodial wallet was exclusively designed with gamers in mind.
Let's delve into the key differences between custodial and non-custodial crypto wallets and determine which one you should use.
What's the Difference Between a Custodial Wallet and a Non-Custodial Wallet?
The main differences at play are: complete control and custody of private keys vs. the possibility of wallet recovery & security.
Third-party service providers are responsible for the overall security and private keys of a custodial wallet. On the other hand, users of non-custodial wallets are solely responsible for their security and private keys.
Non-custodial wallet holders are tasked with remembering long passwords and a seed phrase. A seed phrase can be anywhere from 12-24 words long for the recovery of their wallet. Being unable to remember passwords or seed phrases, may lead to the permanent loss of an investors entire wallet/digital currency.
It’s important to understand that if someone forgets their private keys (password) for their non-custodial wallet. They will lose access to their entire wallet and crypto-assets.
The recovery, in the case of a key loss, can not be facilitated beyond a certain point. This means that after a point, they will not be able to get in. This results in a loss of the entire wallet.
On the other hand, when it comes to a custodial wallet, the recovery is simple through a third-party service provider. Custodial wallets go through a security audit and other security certifications. Cryptocurrencies are managed through secure cryptography software ensuring the safety of the users' funds.
More times than not, a crypto exchange will offer its users their own custodial wallets.
How to Select a Cryptocurrency Wallet?
When someone chooses their cryptocurrency wallet, there are a few critical things that to pay attention to. This can include things like ease of access, usage, security, and recovery. Although preference can vary from one investor to another, if you’re new, it's usually best to choose custodial wallets.
Most market players believe that custodial wallets are the future of cryptocurrency storage and management.
Custodial wallets are a good option for casual investors because they are simple to use and extremely accessible. They offer solid support in a crisis situation while providing an excellent buying/selling experience.
Non-custodial wallets are used by those who want to interact with blockchain technology, decentralized exchanges or dApps. Non-custodial wallets can be extremely secure if used correctly. This is because it gives you full control/access to the funds.
Handling the security aspects of non-custodial wallets is not for everyone. Non-custodial wallets present a higher level of anonymity than custodial wallets. But with that being said, their risk is significantly higher as users could get locked out.
Which Custodial Wallet is a Better Option For You?
Wallet selection completely depends on the intentions of the investor. There are a few things to consider though. An investor should use a non-custodial wallet if they can keep private keys and seed phrases safe. This is also suggested if recovery of funds is part of their investment risk management.