How does a crypto wallet work?

2 min readApr 10, 2022

A crypto wallet is a tool that allows you to interact with a blockchain network. Among other things, you can use it to send and receive cryptocurrencies or access decentralized applications.
There are two types of crypto wallets as follows; custodial and non-custodial crypto wallet.

🔸 What is a custodial crypto wallet?
As the name suggests, a custodial crypto wallet is one where your assets are held in custody for you. This means a third party will hold and manage your private keys on your behalf. In other words, you won’t have full control over your funds — nor the ability to sign transactions.
But using a custodial crypto wallet service isn’t necessarily a bad thing. With a custodial wallet even if you forget your cryptocurrency exchange password, you will still be able to access your account and assets by contacting customer support. However, if you’re using a non-custodial wallet, you are responsible for keeping your crypto safe.

🔸 What is a non-custodial crypto wallet?
A non-custodial crypto wallet is a wallet where only the holder possesses and controls the private keys. For users who want full control over their funds, non-custodial wallets are the best option. Since there are no intermediaries, you can trade crypto directly from your wallets. It’s a good option for experienced traders and investors, who know how to manage and protect their private keys and seed phrases.
You will need a non-custodial wallet when interacting with a decentralized exchange or decentralized application. Uniswap, SushiSwap, PancakeSwap, and QuickSwa are popular examples of decentralized exchanges that require a non-custodial wallet.
Trust Wallet and Metamask are great examples of non-custodial wallet service providers. But remember that with these wallets, you are fully responsible for keeping your seed phrase and private keys safe.

As a result; for beginners, due to the third parties’ accessions to your account, choosing a custodial wallet is a wise decision to make. On the other hand, if you are more familiar with the crypto world and its concepts so you want a more secured, private account, the non-custodial wallet will meet your needs.

How does a crypto wallet work?

Written by Frodo Tech