Bitcoin Forum

I have been mean to ask this question, but it keeps skipping out of my mind. so I have decided to ask to know the importance of non_custodial wallet, because most investors prefer to use non custodial wallet to store most of their asset, why did they choose non custodial wallet when they are many wallet's out there to use in storing their assets? I keep hearing about non custodial wallet so I will like to know of which importance is this non custodial wallet to us as investors?

With noncustodial wallet, you have the private key. Having the private key means you have the full control over your own coins. Only you can generate the digital signature that can be used to spend the coins.

Unlike custodial wallets that you do not have the private key. The company that provided custodial wallet has the private key and they have the full control over your own money just like banks. They can freeze your coins. They can block your account. There can be account maintenance and other inconveniences.

It seems you don’t understand what non-custodial storage means. It is a wallet where you have control of the keys and seed phrase. This way the assets or coins on that wallet is controlled by you, you can move funds anytime you like without having to worry for confirmation from any platform. Also it so save in such way that you don’t get the scare of a custodial wallet collapsing.

If you ask me it is one of the core principles of bitcoin; that is been your own bank. The phrase not your keys not your coins is definitely referring to any one not using non-custodial wallet.

Lastly any wallet that provides you with private key or seed phrase is a non-custodial wallet. The difference now lies on if it is open source or closed source

 I'm still new here so whenever time I see people talking about non custodial wallet I don't really understand what they are talking about so that is the reason why I choose to ask this question so that you guy's can enlighten me more  about non custodial wallet. that is why is very good to ask questions in any area that you don't understand I always ask questions if there's anything I don't understand I don't care what people might say or talk about me, I'm not that type that always keep quiet even if they don't understand they will just keep quiet and pretend like they know exactly what you're talking about when they don't even have any idea of what they are talking about, well thank you so much for making me to understand what non custodial wallet means.

A noncustodial wallet gives you the right to be your own bank, you own your private key that only you is in full control of, and the safety of your wallet is in your hands. Noncustodial wallets are the best wallets for storing your bitcoin, because no one can identify the owner of such wallets.

Custodial wallets are the opposite of a noncustodial wallet. You don't have full control on your private keys and your funds are not safe because, your private key is with a third-party.

The keyword here is simply 'ownership.' Non-custodial wallets are wallets that give the owner complete access to their private keys without any third-party involvement. This also means that the owner of a non-custodial wallet takes full accountability and control of their coins.

Owning and managing a non-custodial wallet solely depends on the user's security level, as no one else will help keep your keys secure. The idea of writing your seed phrase on a sheet of paper or your device, or even trying to memorize it, is strongly discouraged, as this type of wallet comes with a lot of responsibility, but it's also the right choice.

These wallets range from private hot wallets to private hardware wallets. Private hot wallets are usually connected to the internet and come in the form of desktop or mobile wallets, while hardware wallets, also called cold wallets, are offline wallets that are connected to external applications. For adequate security and long term hodling of your Bitcoin, you should consider this type of wallet.

One of the first things that I learned in this forum when I joined as a newbie, was not to leave my coins in exchanges, that it's not safe, because they can go bankrupt or be hacked at anytime, so the best place to leave your coins is in a none custodial wallet. Not your keys not your coins is a popular phrase in this forum, and any experienced member that falls victim of any exchange that went down, then they have themselves to blame for their loses. With none wallets, you are the custodian of your wallet.

I believe the fact is opposite. Most of people, traders or investors, store their bitcoin in custodial wallets, not in non custodial wallets.

They can know importance of non custodial wallet, private keys for their bitcoin control but they can not know about this. It depends but practically most of people don't use non custodial wallets. They want to store their bitcoins directly on centralized exchanges, in online accounts. This practice is not recommended but it is preferable by many people.

Reminder: do not keep your money in online accounts (https://bitcointalk.org/index.php?topic=5421039.0)

Non-custodial wallets are preferred by investors because they offer enhanced security, privacy, decentralization, portability, access to a wide range of assets, and empower users to have full control over their funds without relying on third-party services.

Seriously there is no harm in asking question regarding anything crypto related here on the forum, I can boldly tell you that majority of members here actually learnt lots about the cryptocurrency space or bitcoin from this forum, so feel free to ask.

But one thing i will ask you to place restrictions on is the type of questions you ask here, there are basically some that are not necessary because you can simply use the search button for that and I tell you there will be a thread out there on the forum about the subject matter. For example this your question has a thread here that explains it custodial vs non-custodial wallet explained (https://bitcointalk.org/index.php?topic=5173370.0).

Using the search button makes you not to look like a spammer creating repeating threads but when you ask newbies to make use of the search button you see threads like newbies are been maltreated which is not right.

For future occurrences you can learn how to use the search engine properly here (https://bitcointalk.org/index.php?topic=5276341.0%5Dhttps://bitcointalk.org/index.php?topic=5276341.0)

No need to apologize; no one was born knowing everything, and we also took our time learning even the basics. There's nothing wrong with asking questions, and the majority of users here are actually helpful and friendly. It's quite rare to encounter someone harassing you for simply asking a question, although, there are quite a few threads and guides on this forum mentioning it already. Trust me, if I'd made this thread or had bothered to search a few years ago, I would have saved some of my BTC, which was then in online wallets. It's always best to prevent a mistake; although it wasn't a huge amount, I never managed to recover it. Online wallets seemed easy and beginner-friendly back then, but if only I had known any better.

It’s good to ask questions about what you do not understand and it’s also good to research those questions as well. There is a pinned thread about wallets that answers your question and other questions you may have about bitcoin wallets:  [General] Bitcoin Wallets - Which, what, why?  (https://bitcointalk.org/index.php?topic=1631151.0)

Charles-Tim and others have given you a straight forward explanation. There really isn’t more to be said on the topic. You can lock the thread now.

Thank you so much for your guideline i never knew There are some related topic here in this forum, I guess i didn't came quite on time that's why I miss the topic, I was thinking this is the first time of bring topic like this, but now you introduce this search engine to me I think I will take my time to search before creating a new topic so as to avoid creating a similar topic.

Using a non custodial wallet you have a total freedom to your assets and you are in control of your privacy. In non custodial wallet their is nothing like freezing of funds or crash, this is why people prefer to use non custodial wallet.  The privilege of full ownership of your wallet and and your asset and decentralisation makes non custodial wallet the best for keeping your assets. 

Lose of fund in non custodial wallet is as a result of how you you handle your privacy and security,  so you will be responsible if anything happens to your privacy or your fund.

There is a lot of truth in that, especially if we consider that a very large percentage of people who invest in cryptocurrencies do not know any other concept of storing cryptocurrencies other than keeping them where they bought them. In addition, many are discouraged from withdrawing coins to non-custodial wallets and returning them to CEXs due to service fees, and when it comes to Bitcoin, occasional extremely high fees even when transactions are made from non-custodial wallets.

However, if the data is to be believed, more and more people are deciding to use non-custodial wallets, and the last data I saw somewhere says that all centralized exchanges store around 1.8 million BTC.

It began since Terra, FTX collapses that lead to collapses of many centralized platforms. All those collapses in 2022 and 2023 make people aware more about risk of storing their cryptocurrency in custodial wallets.

More people are fearful that they can become new victims like victims of Terra, FTX, Celsius, Voyager and more in the last bear market. It is a good trend but with new people who join and will join this market, they likely will start with CEX, online platforms as where they store cryptocurrency.

Non custodial in the sense that it is not control by a third party but you are the one control your cryptocurrency by yourself. And the term non custodial is not correct according to experts it is called k own as self custodial wallet because you are the one controlling the coin. So I will also prefer to use the term self custodial and not non custodial.

When I came to forum I was always using the term non custodial but recently I saw a post that says it is self custodial and nothing like non custodial. And made some research in it and I also like to use the term. The important aspect of it is that you are your bank and no third party involvement.

This is a very important comment that the OP should know about. You may go ahead to pick a non-custodial wallet and still not be safe. This is where understanding of the open and closed source comes into play. Before picking a non custodial wallet to use you must understand what a closed source wallet is and what an open source wallet is. If you don't and go ahead to choose a closed source non-custodial wallet it is almost the same as using a custodial wallet. In addition to what you would have read on the forum, I want you to read this - https://medium.com/coinmonks/open-source-vs-closed-source-for-cryptocurrency-wallets-8ae948bb84c2

I never thought that they were different and that's the correct one a non-custodial wallet and a self-custodial wallet had the same meaning.  But IMO, the right one is the non-custodial wallet, which refers to a wallet where the user has complete control over their funds, meaning they hold the private keys themselves.  I didn't know if there was a correct or wrong way to use this term which I think is pretty common if we use this in our community.

People should know how to avoid centralized nor custodial exchanges or wallets.
Privacy and security should be a must while holding on to it and having a power control by using non-custodial is the right way to own crypto.

Well ita like your own bank where you are the keeper and the only one can access too that vault. Its like a bank but you are the customer and the one handling it. No third party or no regulations on when you will withdraw or claim it. The risk is it can be breach if you dont take care of your own wallet or you associated with some viruses or some malicious threat.

Its more like self protection. Most prefer it than storing your asset on third party which could be compromise and you can do nothing about it.

Non custodial wallets are basically like bank accounts but the fact that there is no 3rd party involved. You are the owner of that bank and you hold all your funds at your own risk.
So with non-custodial wallets you hold your coins at your own risk by securing the private key/seed phrase in a safe location.
This key/seed is the main access to your wallet and you have to make sure nobody else get to it any cost.

The benefit is that since there is no middle man involved, the chances of your coins getting stolen becomes slim.
If a bank goes bankrupt then you won't get to access your funds but if you are yourself the owner of your bank then you won't go bankrupt at first place.

You are right to some degree. But one can still determine who uses a bitcoin address (of a non-custodial wallet) to a high certainty based on their spending habits. If that address keeps depositing and withdrawing to and from a centralized exchange where you have undergone KYC, chances are high it's the same person. Also, if you posted that address anywhere online where it can be connected with you real identity, it's the same thing.

The bolded part is not discouraged. It's the way it should be. Your keys should be stored offline on paper or metal. That's the only right choice. The rest is wrong and decreases the security of your keys and coins.

You maintain your privacy by using privacy-enhancing tools. For instance, using TOR and connecting to your own node. Electrum is a non-custodial wallet, but it's not a privacy-focused wallet. The moment you connect to someone else's server, they will find out plenty of information about your bitcoin wallet.

It is also not much different from most custodia addresses. Some wallets you log into using an email address and a password, there is not much one can use to identify you with that. Your identity is only easily exposed if you use a wallet which requires you to submit KYC and in such situation only those with access to the website logs can get personal information.

When you know that you can safely keep your cash in your wallet then why would you keep it in the wallets of others? That's how non-custodial wallet works, you are the only owner of non-custodial wallet as long as you hold the private keys, while the rest of the wallets are custodial which mean someone else takes custody of your Bitcoin.

Investors always prefer to have control over their assets safely and that's why they keep their Bitcoin in non-custodial wallets. If you really want to be the owner of your Bitcoin then non-custodial wallets are way to do that. Those investors who keep their Bitcoin in custodial wallets are at high risk because the ones who take custody of their Bitcoin can do anything with that Bitcoin.

For privacy sake, non custodial wallet is the best because you will have control of your assets in them, unlike custodial wallets where the wallets owners will own the right to your coins.
Private key is an important factor in non custodial wallets because if you have your private key stored in your custody, you can have access to your bitcoin at anytime since the private key is like the password/pin to your account.

Custodial wallets like exchanges have do have some problems along the line which can lead the exchanges to being bankrupt which may result to you as an investor to lose your savings with them.

Always remember this: Not your keys, not your coin.

Non custodial wallet give you the ability to control your funds not like the exchange wallet or custodial that would keep your seed phrase for you making you not to have the full control of your wallet. Understanding the differences would safe you the stress so that you don't store your coins in a wallet where one day they could take your access to your account and you will not be able to withdraw your funds.
I have seen many investors which loses access to their coins because they could not have the seed phrase with them.

Being in control of your keys and coins is a security question, not a question of privacy. Non-custodial does not equal private. It can with the right wallet, but those two terms aren't synonyms. You can lose your privacy using non-custodial SPV wallets despite remaining in control of your keys.

Thank you so much for your information i think I have full knowledge about non custodial wallet, well with your explanations I think that's the best wallet to store our asset since we can have control over our asset's I think that's the best wallet instead of using exchange wallet. what did you think about this opinion? Instead of using a wallet that you won't have full control over your keys.

How do you know that? Where have you seen that most investors are doing that? I don't know what you call "investors", but I don't think many big investors are using non-custodial wallets. They can be easily stolen or hacked, or locked if the seeds are lost. It's not the safest solution for a solution for a big investor IMO, except if he's using multisig wallets eventually but it's as safe as storing millions dollars at home at least, nobody does that. They entrust their funds to the bank actually, it's the same for cryptos.

Non custodial crypto wallets gives true ownership, out of banks and centralized entities, you are the only one in control of your assets, although non-custodial have a bad apple side, and that is some closed source wallet that still gives users access to private keys and recovery seed, but been closed source is red flag so yph need to do your own research on each Bitcoin wallet before using them.

An open source wallet comes with full tramsaprency, even if you are not good with codes there are people who are, you can ask them to help you check the codes if they truly it is transparent and safe but they can't know if the wallet is a closed source crypto wallet.

Right now, I look for more than non-custodial in a crypto wallet, it has to be fully open source and for my own security sake I still prefer air gapped wallet, so it should be three in one.

Air gapped.
Open- Source.
Non- custodial.

Okay, I understood from the aim of the Op is to understand what non custodial wallet is and literally he/she does not have an ideal about the centralized wallets such as the exchange wallets.
I have think I've figured rightfully where he's headed up to.

So Op, non custodial wallets are those Crypto wallets that the crypto holders are responsible in a private modelitty of being in charge of their assets by coded generations of seed phrases for security gadgets to personal stay in control to their assets which is in the non custodial wallet.
The non custodial wallets doesn't demand the processes of KYCs which could keep an investor or a crypto trader on track with their asset transactions.
While the centralized exchange wallets are wallets that deemed not to given a 100% access to your assets private security keys because you can be under watch and trackable with the demands of KYCs to enable p2p transaction in exchange of trading with the centralized currencies such as the fiats.

So people chooses to store their assets in the non custodial because they needed to be sure that they security of their assets is under their control with the seed phrase which the centralized wallets are exemptional to the security and private features.

A non custodial wallet is a digitalized wallet where you have full control over asset with your private key/seed phrase at your own risk.A non custodial wallet is one of the safest wallet to store your asset as you have the full control over it.Since a non custodial wallet can be accessed and controlled from a generated private key/seed phrase,no information about your private keys should be disclosed to anyone,once your seed phrase is disclosed to a hacker,the hacker will be able to access your wallet and withdraw all your coin.So non custodial wallet is at the user's own risk.

At first you should know that as an investor, the safety of your assets and funds matters.  So in that case, it is advisable to store such in a safe place where it is well protected.

Some investors prefer self custodial wallet while some would opt for third party exchange for their services but however be the case your assets would be stored and kept for you but it would be much more secured and safe when under your custody.

If your assets are under your custody, you are rest assured of your assets safety, you have instant access to your assets whenever and wherever you are. You are not under any obligation or whatsoever as a result of any out come or uproars from exchange possibly as a result of hack or data breaches.

I can say that holding your assets yourself is very much fulfilling than entrusting it to third parties or otherwise.

Remember the slogan " Not your keys, Not your coin."