Custodial Wallets

A custodial wallet is a service that controls the private keys on behalf of a user. Custodial wallets are, for example, centralized exchanges where you log in with user name and password.

Advantages and disadvantages

The advantage of a custodial wallet is that you can access it from any device. You simply need to remember your login credentials, and you can start sending ETH.

Another advantage is that the user doesn’t need to take care of managing the private keys. That makes it a good choice for inexperienced users who don’t want to install a wallet on their PC or mobile phone.

But that’s also the biggest disadvantage of custodial wallets. Users totally rely on the trustworthiness of the service provider. They could just display fake numbers on the screen and run away with the money they have received from the users.

Another downside is that some countries could block access to their websites and hence limit the availability of the service in some countries.