Non-custodial wallets allow complete control over the deposits, as users do not need permission from the bank for withdrawals. However, investors must not forget the private key associated with their wallets to avoid losing access to their funds.
Investors can find it complicated to choose between custodial and non-custodial wallets to store their assets. Banks usually offer services to keep custody of the cryptocurrencies of their customers. In other words, the latter must request permission from financial institutions whenever they need to withdraw money.
Unfortunately, banks may find a reason to deny permission to make withdrawals. However, the concept of non-custodial wallets or self-custodial wallets emerged when cryptocurrencies began gaining prevalence.
Non-custodial wallets allow users to keep control over their deposited crypto assets. Besides, the inherent nature of cryptocurrencies made self-custody financial services a practical option.
Non-Custodial Wallet Allows Withdrawing Funds at Will
By following the news, it is possible to see that the crypto market is not in its best shape. However, the current situation has led many crypto-related businesses to suspend their services to preserve themselves. Lending firm Celsius is the first that comes to mind as it had to pause withdrawals and transactions.
Vauld, another crypto lending firm, is also having problems with this. They recently announced that they would suspend withdrawals on their network due to unfavorable market conditions. Since both companies offered custodial wallets, they had control over the deposited crypto assets.
The suspension of the services on those platforms has prevented users from withdrawing their funds. Firms tend to take this measure to avoid massive withdrawals that could disrupt their operations. However, they generate further problems by not allowing users to take out their funds.
However, Investors Should Be Careful When Operating Non-Custodial Wallet
Although non-custodial wallets offer users the advantage of complete control over their crypto assets, there are some caveats. Investors must have the private key associated with their wallets. That mnemonic phrase consists of 12 to 24 randomly generated worlds, which they should not forget. If that happened, they would permanently lose access to their wallets and deposited assets.
However, investors may turn to the option of a cloud backup service that many non-custodial wallets offer. They can use any popular cloud service, like Google Drive or Apple iCloud, to store their private keys.
In addition, non-custodial wallets allow users to customize fees for public blockchain miners and validators. They can also interact with smart contracts supported by non-custodial wallets. All that is possible because non-custodial wallets have direct access to blockchains.
Cryptocurrencies have become relevant in the world economy, of which those investing in them are aware. Due to the current decline in overall markets, users look for alternatives to store their holdings. Non-custodial wallets are an excellent option to do so, but they must be careful not to lose their private keys.
Meanwhile, Bitcoin is trading at around USD 20,847 and has accumulated a 5.4% gain over the last 24 hours. While its daily trading volume is above USD 42.85 billion, its market capitalization is about USD 398.07 billion, according to CoinGecko.
By Alexander Salazar
