Bitcoin Forum

I recently purchased some Bitcoins butAccording to most posts and replies on this forum it seem the best way to hodl Bitcoin is to use a hardware wallet as long as you can keep it safe.
Well is the hard ware wallet better than a custodial wallet??

Custodial wallets are the worst type of wallets you can use.
When you're using that, you're trusting someone else to keep the funds safe for you (from hacks when someone is targeting that service's hot wallet directly or your personal account, the wallet provider running away with the funds, etc.).

You don't have to deal with any of that when using an HW. But make sure you're buying the wallet directly from the manufacturer, and keep your seed phrase somewhere safe.

You already admitted to seeing a few posts here that talk about how unsafe it is to save your coins in a custodial wallet. 
Just grab yourself a hardware wallet from a trusted seller and set it up. If you can't also grab a hardware wallet for now, for the time being, I will recommend you try using the Electrum mobile or desktop wallet; it's kind of safer from there. 

Just as @OmegaStarScream has said above, every coin held in a custodial wallet is to some point not yours; they can be frozen, stolen, or sometimes you might be restricted from having access to them because the service providers of those custodial wallets can decide what ever they want to do with your funds.

the feeling of putting your money or cryptocurrencies inside a custodial wallet is the same feeling as going inside a comfort room and being watched by a CCTV camera. what's the hardest part about those custodial wallets is that, they can implement their own rules to their platforms and you didn't have any choice but to abide those laws. in my case for example, here in our country there are only few providers of custodial wallets, and all of them will be asking for your verified identity or ID/KYC for you to be verified and to be able to use their platform. even if I personally don't have issues on providing personal information, what i am heavily concern is that, they will attach limits on your account depending on what level of verification you have. there are even cases here that even if they provided their information they are not yet verified or their account is still under review for the sake of "user security" which is just utter b*llsh*t, and if you mistakenly transfer your money on that wallet, you won't have any choice but to verify it since you cannot withdraw it unless the system recognized you as a verified user.

providing personal information alone has already become a huge problem, there was this one friend of mine, who's account got locked due to him being unemployed but he transferred big amount of money from an exchange. i speculated that maybe the wallet provider thought that he is laundering money, and because of that incident other wallet providers here will require us to tell them what or where is the source of funds came from and they will still put limits on that, if we exceed that limits either the account will be in question or it will be locked forever, the worst part is that since you provided personal information initially, there is a high chance you'd get arrested if you cannot provide proper explanation.

now compare that to non-custodial wallets or hard wallets? you can just easily plug in/out anywhere and transfer funds without worries other than transaction fees.

Custodial vs. Non Custodial Wallets - "Not your keys, not your coin" Explained. (https://bitcointalk.org/index.php?topic=5173370.0)
[General] Bitcoin Wallets - Which, what, why? (https://bitcointalk.org/index.php?topic=1631151.0)

Custodial wallets are like exchange, online accounts and you only have a public address that is given to you by that exchange, that online platform. You don't own a private key of that public address, so you rely on that platform to receive and spend your bitcoins. It's not your coins, it's that platform coin.

Non custodial wallets are different and you own its private keys, you own your coins. You are completely free to do everything you want with your coin with coin control features.

Hardware wallet is most recommended because when you spend your coins, you don't have to leak your private key to Internet, so no risk to be hacked. Of course, there are back doors if you buy second hand hard ware wallets from bad people.

It is a good thing to see that as a newbie to buying bitcoins, you are already taking the safety of your bitcoins seriously. A hardware wallet is the first option for optimally keeping your bitcoins safe but it is not affordable to everyone, and usually recommended for people who have a large amount of bitcoin, not really newbies in bitcoins who just purchased a small amount. As a new person in bitcoins, a non-custodial wallet can work for you so far as you practice safety measures until you can afford a hardware wallet.

There are many things you should not buy as fairly used or second hand, and a hardware wallet is one of them majorly, no matter how cheap.

One of Bitcoin's attractive features and one of the reasons why Satoshi created it was that
it enables us to take FULL CUSTODY of our money/finance/wealth. This means not having to
trust a bank to hold that money which
gives us limited access to it.

Why would anyone not spend <$100 on a hardware wallet and take full control of their
Bitcoin? There then would be no need to TRUST others to look after your Bitcoin.

See for yourself why custodial wallets are bad for long-term holding: https://chainsec.io/exchange-hacks

As for wallets in general, summary: hardware wallets > mobile non-custodial wallets > desktop non-custodial wallets > custodial wallets
If you want it more detailed: https://chainsec.io/wallets

Custodial wallet means someone else is taking care for the security of your bitcoin. While non custodial (hot/cold) or hardware wallet refers to take care of your bitcoin yourself. What do you think? Which one is better? When someone else is responsible for taking care of your coins, remember that you don't own the coin like they say "Not your keys, not your coins."

Crucial Topic.

Custodial wallet is a type of wallet that requires a third party to takes hold of private keys on behalf of every user.
Which makes asset more secure, because only the third party and the user knows the private key.
In a case where there is missing asset, the private key must have been shared to someone outside the third party and user.

As for Hardware wallet, just misplacing it could put the user at risk, because no third party to help checkmate the security.

What I mean by custodial wallet in simple terms is that using it means giving access to your funds to someone else.
Custodial wallets should never be used for holding and the reason why can only be understood if you look at the FTX exchanger incident.
Noncustodial hardware wallets are always best for securing your funds. First of all it is not connected to the internet so no one can easily fall into the trap of phishing or hacking. Also, since it is physical, its encryption security capabilities are stronger, so the answer to your answer is yes, of course, hardware wallets are always better than custodial wallet

OP custodial wallets are wallets that are controlled by the developers, they work like banks, meaning if you keep 1000$ in the wallet, the developers have access to the wallet, behind your back.

There is one thing we call a private key or recovery seed, this is what you need to gain control of your wallet, no one will have access to your funds if you are in control of your private key or your recovery seed.

What you need is a Non-custodial wallet, for example Electrum, when you open this wallet and create a new account you will be given your recovery seed straight away, all you need to do is keep the recovery seed safe, do not share with anyone.

Assuming your phone gets lost one day, you can download the Electrum wallet into a new phone and import the recovery seed into the Electrum wallet, all your funds will be back again.

Recovery seed and Private key are very important for any crypto investors, keep them safe.

Simple answer: Yes!

The past few years have shown time and again how important it is to keep your bitcoins yourself. So many people have lost their coins because they entrusted their private keys to other people. In order to prevent this, you should always have sole control over the private keys and thus over the bitcoins. Everything else always carries a risk that you could lose the coins. Therefore you should not use a custodial wallet or leave the coins on an exchange, casino or anywhere else.

Currently you can even win a Ledger hardware wallet here in the forum. So if you don't have money for a hardware wallet, try your luck there.  ;)
[FREE RAFFLE] Betnomi Cold Wallet 🦊 (https://bitcointalk.org/index.php?topic=5446281.msg61975215#msg61975215)

The bolded part of your post caught my attention. I'm not sure by what you mean by "makes it more secure".
Are you implying that using a custodial wallet makes your coin more secure or what? The fact that it's called a "private key" and not a "shared/public key" should already give you the idea that its not meant to be shared with others only the owner of the wallet should know the private key of his or her wallet.

To the Op, if you're unable to afford a hardware wallet then you can also use some reputable non-custodial wallet like Electrum,  you can use it has a cold wallet and that will provide the same security as a hardware wallet.
The way you use your wallet determines how much secure your coin will be. but if you decide to be careless with your wallet even if you use the most secure hardware wallet your coin might still be stolen.

A custodial wallet is managed by a third party, like an exchange or wallet provider. They keep your private keys and manage your funds on your behalf. You put your trust in them to keep your assets safe, but there is always the possibility of a hack or the third party going out of business. Some custodial wallets may provide insurance or security measures, however it is critical to be aware of the risks. Hardware wallets on the other hand though, you are the one responsible for the safety of your bitcoins so if you think that you can be sure that you can secure your hardware wallet yourself, you can go that way but if not, considering a custodial wallet might be your best choice.

I think people that are too afraid to hold on to private keys by themselves and prefer custodian wallets are people that are easily comfortable with banks and exchanges having their private keys.

Losing an hardwallet doesn’t necessarily means the coins are gone forever because there’s the seed phrases that could be used to recover or generate the private key. This seed phrase could then be imported into a new hardware wallets to recover funds. To secure one’s seed phrase or private key from missing, multiple backups are required and could be stored in different locations just in case of natural emergencies.

And if at ones is afraid of security needs another human back then a family relative could even be less risky than having to trust a custodian wallets which could be face by hacks and could expose the keys to not just the hacker but multiple others

Custodian wallet is controlled by someone and you are at big risk with your investment in such wallet because, this custodial wallets are vulnerable to attack. For example information of clients can easily be accessed by someone out or inside and this will be used as advantage for hackers to penetrate in it and steal all funds, or the exchange or platform can misuse your money which you entrust to them and this will lead to the crash of the platform. All your funds will be gone and there will be nothing that you can do to claim your funds. Recently Paxful exchange crashed in my country with all customers funds gone.

Noncustodial wallet is the best and keep your coin very secured from anyone to easily have access into it. With this wallet only you control and know about your funds,and you are you own bank. Don't forget bitcoin slogan that says not your keys,not your coins. Only keep funds that you can afford to lose in a custodial wallet.

Just for the sake of explanation custodian wallet is bank whereas the hardware or non custodial wallet is your own vault so which gives access to your money and complete control of it. When it comes to hardware its more secure because it keeps the assets safe even if we connect it to an infected device but everything comes with pros and cons so the negative side of hardware wallet is it can be damaged physically by accident, etc.

When you use custodial and exchange wallets like you deposit money in a bank, you don't have full control over your assets, your assets can be frozen or locked at any time. But when using non-custodial and hardware wallets, you become your own bank, you have full control over everything, and whether your assets are safe or not is up to you to decide. Hardware wallets are the best, but if you are not ready to own them, you can also look for another solution like a non-custodial wallet, it is still more secure than a custodial wallet.

There are alternatives for hardware wallets like cold wallets, multi-signature wallets with SPV wallet softwares like Electrum wallet. If you don't afford to buy a hardware wallet from official store, don't buy second-hand hardware wallet. You can always use alternatives which are safer and free to use.

Electrum wallet is free for download and use. If you want to use it as a cold wallet or multi-signature wallet, you only have to learn a little bit and can set up yours.

Creating a cold storage wallet in Electrum (https://bitcoinelectrum.com/creating-a-cold-storage-wallet-in-electrum/)
Creating a Multi-sign wallet in Electrum (https://bitcoinelectrum.com/creating-a-multisig-wallet/)

And the difference is huge...if we could rate custodial wallet (1-10) it was just 2 while hardware wallet is 9.
Hardware wallet gives us a higher level of security but the question is if the amount of your Bitcoin is worth enough to store there or something you look for another option like using Electrum wallet.

---

But I tell you that no matter what wallet you are using and if you are too careless, especially on links that will address you into logging your wallet account, that doesn't matter as there is a bigger chance that you will lose your funds. In fact, I was using an electrum wallet for many years and fortunately, I'd never experienced hacking.

Pay attention to these two points:

• Choosing a hardware wallet is the wisest choice when you expect your bitcoins to be stored with the best level of security.
• Hardware wallets are also the wisest choice when you want to store relatively large amounts of bitcoin.

But in my opinion, hardware wallets are ideal for users who have experience in bitcoin rather than beginners. But if you are just starting out, then I can instead recommend you choose an open source mobile or desktop wallet, and you can switch to hardware wallet as your experience in bitcoin has developed. But when it is about which is the best between hardware wallet vs custodial wallet, then hardware wallet is the best choice.

Software Wallets are 100% safe if they are used correctly. Bitcoin was designed to be used only with software wallets. Still hardware wallets are a good invention since they make it more easy to store your bitcoins. So if you have the money you should get one.

Not all software wallets are 100% secure, even if you use them correctly. We have custodial and non-custodial wallets, if you use a custodial wallet, it means you don't have complete control of your bitcoins, when using the custodial wallet, your bitcoins are no longer yours anymore because you don't keep private keys. But in contrast to a non-custodial wallet, you are the only one with the key to access your bitcoins, which is much more secure than a custodial wallet. Hardware wallets are non-custodial wallets.

Custodial wallets are red flags, they can decide to close down one day and walk away with customers' funds since they are the ones holding the private key of every customers wallet, custodial wallet are the wallets that require you to log into the platform and deposit your assets, all you need to use is an email account and your password, when you see such crypto wallet, run.

Many people have lost a good amount of BTC, DogeCoin, and LTC to free wallets, till this day I doubt that they paid a soul back, instead they even deny that they did such things, with many proofs against them.

If you want the safest crypto wallet for Bitcoin, buy a hardware wallet.

Hardware wallet is the best if you don’t want to worry much about your asset as a beginner because your private key won’t leave your hardware wallet every time you use it unlike custodial wallet that you don’t have access to your private key.

Electrum and other non-custodial open source wallet are the alternative option if you can’t afford to invest hardware wallet during your initial investment journey on crypto. Actually most reputable member here start on these wallet since hardware wallet doesn’t exist when we are all newbie on crypto. It’s just hardware wallet make life of newbie easier on keeping safe their assets compared on traditional non-custodial wallet that keep you importing private key or seed phrase whenever you will access your wallet on different device.

The hardware wallet is much safer than a custodial wallet, but if you don't have much Bitcoin, and especially if you have different altcoins it's easier to use a non-custodial wallet.

After reading the pros and contras I tend to believe that non custodials are wisest in safeguarding. 
As long as you know how to restore them.

My friend never trust those custodial wallets, they aren't safe at all. They have access to your whole coins and they can do whatever they want with your coins. They can simply steal your coins and make up a news that their system was compromised by hackers. I would also recommend you to keep in mind that most hardware wallets are unsafe. When you choose a hardware wallet try your best to research as much as possible before deciding to go with any of them.

It should be far better to install a secure software wallet on a separate desktop, and then disconnect that wallet from internet. Also make sure it has a secure SSD installed in it. The software wallet is far safer than the other options.

It should be simple enough as long as you can read basic computer-related instructions. And if you understand Bitcoin and/or cryptocurrencies enough to actually risk some of your money, you should be able to easily know how to restore a wallet backup.

You don't know how a custodial wallet works. You never own the private key in a custodial wallet. It's the third party or your custodial wallet that secures the private key and holds the coins for you. You know it means you don't own the coins but some number in the custodial wallet you use. They can freeze your account, run away with your coins, etc. How come you think a custodial wallet is better? Spend some time learning all these before you invest in cryptocurrencies. Did you know what happen to mtgox, maybe the recent issue with FTX or a lot of issues in the lending platform etc? Have some deep digging on these.

You will have your wallet and the seed key. Just make sure you have access to any of these. Write your seed key few times and store them on different places.

If you don't want to make it too complicated just use Electrum wallet, It's one of the best wallets to store your Bitcoin, it's secure, has seeds, and a private key, and it's easy to install and access on your computer, obviously better than custodial wallets.

A hardware wallet is the best when it comes to security but your gonna need to buy the hardware if it's not an issue go for it, Custodial wallets are the worst since you don't have control over your funds at any moment they could easily freeze your account, banned it, or worst similar to what happened to FTX.

So you want to keep your Bitcoin safe, huh? Well, you got options, but according to the folks on this forum, a hardware wallet is the way to go. Think of it like a physical gizmo that holds your secret codes and gives you access to your Bitcoin.

But why exactly is a hardware wallet better? Simple - it adds an extra layer of security compared to other wallets. Take custodial wallets, for example. These wallets need someone else, like a broker or exchange, to keep your codes safe. It might sound good, but it means you're giving up control over your Bitcoin. And if anything goes wrong, you're up the creek.

If you want to have your Bitcoin under your own control, you gotta use a hardware wallet. That means no third party is holding your money, and you call the shots. But listen up - using a hardware wallet ain't no child's play. It requires a certain level of tech skills, and you gotta read and follow the instructions like it's your bible to make sure your Bitcoin stays safe and sound. So, if you wanna be a pro at hodling, a hardware wallet is the way to go, folks!

Yes, absolutely because it creates the private keys inside the device itself and does not expose them to the network during creation, this is certainly the best way to keep your bitcoins.  As an alternative to an HD wallet I suggest you download the ISO image of Tails and burn it on a USB, inside you will find electrum but Tails is an os that only uses tor and is much safer than any other.

Well, OP, I believe you mean to say a non-custodial wallet because a custodial wallet is just like the bank; they have every detail about your funds. But using a non-custodial wallet means that you have full control over your private key or wallet secret phrase, which you can use to access and import your wallet any time you want. If you want to keep your bitcoins in cold storage, you can use a hardware wallet or an electrum wallet generated on an airgapped device.
@tbct_mt2 already made a good suggestion

A custodial wallet in my eyes is exactly the same thing as a third party wallet, like an exchange wallet for example. And if that wallet is not open source, like Trustwallet (although Trustwallet is non-custodial), then there is even less reason to trust it. Such wallets have to be viewed as third party wallets because in the worst case scenario, your funds could be taken from you for any reason. Its a huge security flaw and I do not recommend it. There is no need for trust when it comes to cryptocurrency.

The best option is always a hardware wallet. 99.9% of the time, nothing will go wrong with any kind of custodial wallet. But if (when) it goes wrong, you lose everything. Thats not something I would want to risk.

I wouldn't put it like that, I would say it depends on the user. Custodial wallets are 10/10 safe if you do nothing with it and not connect it anywhere, just keep holding it, which is what hardware wallets basically do and if you take it out there to trade then it becomes dangerous there too whereas in custodial you do not take it out but you trade or basically you connect somewhere which triggers the risk.

I personally feel like if you know how to use it and if you are aware of how you should not connect to anything if you are not certain, then there shouldn't be any problem at all. There are people who connect to websites with no ssl, imagine that, ssl is mostly free in most shops and they don't even have that, which makes custodial less prone to hacking.

Comparing a hardware wallet to a custodial wallet is identical to keeping money in a safe at home and keeping money in a bank.

In the first case, only you have access to your funds and have full control over the situation. But in connection with this, additional difficulties arise: you take on all the responsibility for ensuring the safety of storing money. If you make a mistake somewhere, then only you will have to sort out the problems.

In the second case, the bank's security service will not allow attacks on your money from outside, but there are no guarantees that there will be no attacks inside the bank. That is, bank employees or management can simply deprive you of access and the money itself. The bank may go bankrupt, cease to exist, and so on. In short, there is always a risk of losing money.

Despite the fact that each of these methods has its own nuances, most bitcoiners prefer HW devices. Trusting your crypto to third parties deprives one of the most important features of bitcoin - it's self-sufficiency.

There is nothing 100% safe in the world, and not only software, but also hardware wallets are no exception. But the custodial wallet doesn't even come close to 100%, because not your keys means not your bitcoins. Trusting your bitcoins to a third party is not even close to the spirit of bitcoin, which implies responsibility for any actions with your coins. With due care, a non-custodial wallet can be secure enough to be used, but few people take due care.

You need to learn about custodial and non-custodial wallets, hardware wallets are non-custodial. If you want to be safe, you should spend some money on a hardware wallet, but if you don't have enough money for it, you can use a non-custodial wallet. Whether your assets are safe is largely up to you, so using a software wallet is just as safe as a hardware wallet if you use it correctly. But as non-custodial wallets, don't confuse them.

Point of owning a hardware wallets is not to make it more easy to store bitcoins (after all software wallets are more convenient for everyday use) but rather to make your bitcoin more secure. Advantage of hardware wallets is that private keys never leave the device so even if you download malware on your PC, attacker still won't be able to steal your bitcoins while same can't be said about software wallets.

Custodial wallet is like a bank where you need to follow all of their terms of service including with the change which they will not let you know, vulnerable against hack, charge some hidden fee e.g. during withdrawal or inactivity, ask any form of personal information until they satisfied, and will not able to refund your money if something bad happen in their exchange.

While hardware wallet is non custodial wallet which never connected via internet, you're the one who can access the wallet except you share your seeds or private key to someone.

This is a clear mistake, you decided to buy bitcoin before you were even sure about how you were going to store it, but since the mistake is made already then you need to solve this as soon as possible.

Custodial wallets are by far the worst as you are relying on someone else to store your coins and be nice enough to give them back to you, if you are going to do this you might as well keep your fiat and store it at the bank, as this still be a safer approach compared to custodial wallets, so if we are realistic you only have two options, if you have a decent knowledge about computers you could use a software wallet, or if you do not feel confident on those skills then you could buy a hardware wallet and store your bitcoin in this way.

A hardware wallet is far better than a custodial wallet. If you bought a huge amount of Bitcoin then you should never use any custodial wallet because in crypto we know that " Not your keys, Not your Coins". You can choose any non custodial wallet like Electrum which is better than any custodial wallet in terms of security.

The decision to use a hardware or custodial wallet depends on your preferences and investment goals. For example, a hardware wallet is generally considered the most secure option if you plan to hold a large amount of Bitcoin or other cryptocurrencies for the long term. However, a custodial wallet may be more suitable if you plan to trade frequently or need easy access to your funds.

You don't need to buy a hardware wallet, you can use a non-custodial wallet, and this wallet is also secure enough for your bitcoins. What matters is how you use it, not just the hardware wallet that automatically gives you absolute security. I've been using Electrum for years and I haven't had any problems with it.