NFT, which stands for a Non-Fungible Token, is a hot trend in the market right now, and mostly everyone wants to jump into the NFT market, especially after the celebrity involvement and NFT Games. While some people are here to make quick money, others plan to generate passive income with the help of NFTs.
With the constantly growing popularity of NFTs, especially in art auctions, many people are showing interest in investing in these digital assets. At this point, the custodial vs. non-custodial NFTs debate is quite significant considering the massive scale of adoption of NFTs. It is essential to understand crypto wallets to understand the differences between these two terms.
Understanding Cryptocurrency Wallet
A crypto wallet is a tool that allows you to hold different cryptocurrencies and helps you to interact with the blockchain. A cryptocurrency wallet is required when you want to use any Decentralized Apps, also popularly known as DApps. It would help if you understand two things regarding cryptocurrency wallets: a public key and a private key.
Your cryptocurrency wallet’s public key helps generate the address where anyone can send some cryptocurrency. On the other hand, the private key to your wallet is something that you have to keep secure and treat like a password because if anyone gets access to eat, they can easily see your transactions and steal your funds. You can save these keys in a text document or lock them in a hardware wallet.
Along with Cryptocurrencies, some crypto wallets also allow you to store and transfer NFTs from one person to another.
What is Custodial NFT Wallet?
To understand the concept of Custodial NFT Wallets, you must know what a custodial crypto wallet means. A custodial crypto wallet doesn’t give you complete control of your private keys, and a third party stores your assets for you. This can be an exchange or a custodial wallet service provider.
In the same way, when you store your NFT on a custodial wallet, you trust a third party with your assets. If you misplace your private key, you can permanently lose access to your assets; however, when you authorize a third-party provider, the responsibility for your investments is passed on to them. You also get support from the custodian when you forget the password to your account, which allows you to access your assets easily. Custodial NFT owners usually rely on the security measures taken by their custodial for the safety of their NFTs.
What is a Non-custodial Wallet?
After reading about custodial wallets, you might already know how a Non-custodial wallet works. A non-custodial NFT wallet is a wallet where only the holder has access and complete control over the private keys.
Having a Non-custodial wallet is the best option for the people who want complete control of their NFTs. Since no third party is involved, you must remember the private keys and seed phrases to keep your NFTs safe.
Which wallets can I use with NFTs?
Choosing an NFT wallet is completely based on your preference because you can use both Custodial and Non-Custodial wallets for storing your NFTs. However, it is important to ensure that your wallet can support the NFT you want to store. This is because NFTs exist on different blockchains with different types of token standards. Every token standard has its own set of rules which is used to determine how a token is created, the most commonly used token standards are:
- Ethereum: ERC-721, ERC-1155
- Binance Smart Chain (BSC): BEP-721, BEP-1155
MathWallet, TrustWallet, and MetaMask are some of the non-custodial wallets that you can use to manage your NFTs.
Both Custodial and Non-custodial wallets have their own advantages and disadvantages, so choosing a wallet totally depends on your usage. You must follow the rules for both wallets when you want to keep your assets safe.
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