Both self-custody and non-custodial refer to wallet systems that give users complete control over their private keys and funds.
A self-custody wallet such as Core, as the name implies, means that you, as the wallet owner, are responsible for safeguarding your private keys and managing your funds. These wallets provide users with full control and ownership of their cryptocurrencies. The private keys, which are essential for authorizing transactions and accessing your funds, are generated and stored on the user's device, not on any centralized server.
With a self-custody wallet, you are solely responsible for maintaining the security and backup of your private keys. If you lose your private keys or the wallet file, there is usually no way to recover access to your funds. Examples of self-custody wallets include hardware wallets, desktop wallets, and some mobile wallets that allow users to control their private keys.
The term "non-custodial wallet" is often used interchangeably with self-custody wallets. A non-custodial wallet is a type of cryptocurrency wallet where the user retains full control of their private keys and funds. The wallet provider does not have access to or store your private keys on your behalf. As a result, you don't need to trust a third party to safeguard your assets.
The concept of non-custodial wallets is significant because it aligns with the core principles of decentralization and security in the cryptocurrency space. By using a non-custodial wallet, you reduce the risk of losing your funds due to hacks or the mismanagement of your private keys by a third party.
In contrast, custodial wallets are those where a third-party service (like an exchange or a wallet provider) holds and manages your private keys on your behalf. While custodial wallets may offer convenience, they require you to trust the service with your funds, which may not be in line with the principles of decentralization and security associated with cryptocurrencies.
Overall, self-custody and non-custodial wallets provide users with greater autonomy, control, and security over their digital assets, making them a preferred choice for many cryptocurrency enthusiasts.
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