What are Custodial Bitcoin Wallets?
We all live in the custody of other people, and we can not say that we do not need permission from anyone to do any work. We have to take the consent of our parents, boss, leader, Guru to perform any work at home, office, career, spirituality.
But in the case of bitcoin technology, there is no need for permission to do a transaction because no third person is controlling or managing it. Furthermore, bitcoin investment will take care of your asset as much as a wallet. But there are some wallets that we are not responsible for maintaining or working, but the organization’s owner is responsible for.
What are custodial Wallets?
As the name of this wallet describes it, Custodial bitcoin wallets are wallets that work under the custody of a group of people (organization/company). Many custodial bitcoin wallets are coming into existence because the demand for this digital gold is rising in this digital era. These are the wallets providing additional services to the bitcoin users to make the cryptocurrency user-friendly and straightforward so an ordinary person can also use bitcoin as a domestic currency.
How are custodial wallets different from non-custodial wallets?
The non-custodial wallet is a wallet with no control of any other organization. Only the bitcoin wallet users are the owner, manager, or controller of their coins. But custodial wallets are that wallet that is controlled and managed by other organizations, and they provide additional benefits to the users than non-custodial wallets.
For example, they have control to decline any transaction of users, and they can use their users’ data for legal purchase because you have to provide your personal information for creating an account. They can also suspend their performance on a custodial wallet if they find any suspicious activity, and they have to provide their personal information to the government when required.
Benefits of Custodial Wallet:
Custodial wallets are also known as exchange wallets (popular name in the cryptocurrency network), and there are a bunch of bitcoin benefits you will get from custodial wallet given below:-
- Prompt withdrawal and deposit:- The most prominent feature or benefit of a custodial wallet is immediate withdrawal and deposit of money into the exchange wallet in seconds without any formality. You can add money to your wallet any time and withdraw the profit, but the custodial wallets charge fees for this instant service. Some custodial wallets charge fees on both options (deposit and withdrawal), but some exchanges charge for withdrawal only.
- Domestic Payment Support:- The most significant limitation of the non-custodial wallet is that they do not support domestic payment like INR, PKR and other currencies except dollars. Custodial wallets support every user worldwide because they can easily purchase bitcoin in their own money. There are different payment methods that custodial wallets support, such as other bank accounts, UPI payments, Google Pay, PhonePe, Paytm, Paypal and third-party payment apps. It would help if you always chose the domestic custodial wallet because it will support all the payment methods in your country to make your buying and withdrawal straightforward.
- One-click buying and selling:- The significant benefit of a custodial wallet is one-click buying and selling. Unfortunately, some non-custodial wallet interfaces are complex to understand, and a non-technological person cannot use them properly. Hence, an ordinary person feels that bitcoin is a challenging technology to understand because of its UI/UX design. But Custodial wallet’s interface is user-friendly (any student under the age of 16 can also operate), which means you can purchase and sell bitcoin in one or two clicks after declaring the number of bitcoins.
- Privacy:- The problem with the non-custodial wallet is a privacy issue because blockchain is publically visible (anyone on the blockchain website can see the transaction of any person by searching the id and can see the transaction amount of the sender’s or receiver’s transaction id). Many people want privacy in their bitcoin transactions, so they go with the custodial wallets because they provide anonymous identity to your transactions so that no one can see your real transaction id.
- Trading:- Some non-custodial wallets are not providing the trading feature, and because of the complicated user interface, people do not trade bitcoin on these platforms. Custodial wallets provide the trading feature in their website or application with charts and user-friendly animations to make it more engaging and exciting. Many people use third-party custodial bitcoin wallets for trading purposes to earn money since bitcoin trading is becoming popular day by day.