Generally speaking, bitcoins and other cryptocurrencies are accessible via wallets. Getting a wallet can be as easy as signing up with a service like Coinbase or Cash App , downloading an app to your mobile device, or as complex as running special wallet software on your computer. However, it is important to note that your crypto does not actually exist “in” your wallet. But your coins exist on the blockchain, which is the immutable record of transactions and wallet balances. Your wallet, in fact, allows you to interact with the blockchain and control what you own.
There are basically two types of wallets you can access your bitcoins and other cryptos with. The first type is a custodial wallet and the second type is a non-custodial wallet. You see, wallets are comprised of cryptographic key pairs- a public key and private key. The public key is the wallet address you can share with others to receive payment. The private key is used to send funds out from your wallet. A custodial wallet is one in which you do not have access to the private key. And a non-custodial wallet, you alone control your crypto with the private key.
Custodial Wallets
For example, if you bought Bitcoin from Coinbase or Uphold, your crypto is held in a custodial wallet. They are essentially acting like a traditional bank holding and moving your funds on your behalf. It’s important to note that you may be able to access funds in the account with a custodial wallet if you forget your login credentials, like if you lost the password for your banking app. Most custodial wallets require your identity details, otherwise known as “KYC” (Know Your Customer), and can assist you in the recovery of the account in question by verifying your identity.
Non-custodial Wallets
A non-custodial wallet is a wallet in which you alone control with access to the private key. A non-custodial wallet, for example, is kind of like a safe you stash your money in, and you alone have the key to access it. Similarly, if you lose your private key, you lose access to your funds… forever. Being your own bank requires due diligence!
There are different types of non-custodial wallets for Bitcoin; full node wallets and wallets that use remote nodes. Full node wallets contain the entire distributed ledger or blockchain. A full node contains all the transactions that have ever occurred since the beginning of the blockchain to the present. That’s a lot of data! So if you don’t keep your full node wallet online constantly, you will need to sync to the current block to access and spend your funds. This can take quite some time. Wallets that use remote server nodes, like Electrum and Coinomi, load quickly and do not occupy much space on your device. Here are some non-custodial wallets:
Electrum (pc and phone app)
Coinomi (pc and phone app) [DApps]
Bitcoin Core (available only on pc) <- Full node wallet
Coinbase Wallet – non-custodial wallet offered by Coinbase (phone app) [DApps]
Ballet Wallet – cold storage wallet- great for beginners
For beginners, custodial wallets like Cash App or Coinbase provide you with a wallet app to quickly and easily access your funds.
If you like the idea of being your own bank with full control of your crypto use a non-custodial wallet like Coinomi or Coinbase Wallet. Please read the instructions very carefully on backing up your account/wallet. Remember if you lose your private key and/or password you forever lose your funds. Always backup! And NEVER, I repeat NEVER share your private key or backup seed phrase with anyone. Anyone with access to your private key or backup seed will have access to your funds! If anyone ever asks for your private key or seed phrase, it’s a scam!
For beginners wanting to hold bitcoin for the long term, I suggest using a cold-storage wallet like Ballet. Check out these beautiful hardware cold-storage wallets here: BalletCrypto.com and use discount code CRYPTOBEN for a 5% off discount. Keep these as you would cash and store them somewhere safe. Anyone who has access to the card itself has access to your funds!