When you purchase a non-fungible token, or NFT, that token becomes yours, ultimately living in the cryptocurrency wallet of your choice. However, as you dive in, you’ll find that there are three primary types of wallets, custodial, non-custodial, and hardware, but which should you choose for storing your assets?
Looking at the Three Options
First, let’s take a look at the three different options to see what the differences really are:
Custodial Crypto Wallets
When you sign up for a crypto wallet, the security key is the most important thing to keep track of. Without the key, you won’t be able to access your assets, and if the key is lost for good, so too are the assets.
Custodial wallets help to make sure that never happens. With these wallets, a third party, or crypto custodian, has access to the security key and is charged with keeping that key safe. Therefore, with this kind of wallet, if you lose your password, you’re not completely locked out of your wallet for good, you have a path to recovering your key.
Non-Custodial Crypto Wallets
Non-custodial crypto wallets are a lot like custodial wallets. They both live online, store transactions from the blockchain, and help to keep your assets safe. However, there’s one key difference that’s pointed out by the names of these wallets.
With non-custodial wallets, there’s no custodian that can help you get your hands on your security key if you lose it. That may seem like a drawback, but there are benefits to non-custodial wallets, the primary one being security. Since third parties are unable to access your key, you’ll be the only one with it, ensuring that nobody but you has access to assets in your wallet.
Finally, hardware wallets are another hot option among the NFT community. These wallets actually live offline in a piece of hardware. Like non-custodial wallets, the wallet owner is the only person with the key and the ability to access the wallet.
Which Option Is Best For You?
The wallet you choose is completely up to you. However, there’s quite a bit of fraud in the crypto space, as is generally the case with new, popular, unregulated financial products. As a result, most experts would suggest the use of a hardware wallet.
However, if you find yourself to be forgetful and believe you will lose your security key to a hardware or non-custodial wallet, you may want to consider a custodial wallet so you can ensure access to your assets in the future.