custodial vs. non-custodial crypto wallets

we say defi (decentralized finance) all the time thinking that we're completely removed from third parties in the financial system, but we need to make sure that is the case by looking at our very own crypto wallets

custodial – your crypto is handed over to third party to be stored (i.e. coinbase, ftx, etc.) rather than you taking care of the funds yourself

• pro: having a third-party may be useful in case you lose access to your funds (i.e. forgetting your "password"), as the service usually enables you to verify your identity via other methods (phone number, email, etc.)

• con: someone else is holding your money for you, which means they may simply steal it from you (which is what happened with ftx recently)

non-custodial – a piece of software on your computer or phone that allows you have complete control of your crypto

• pro: only you get to hold your own private keys, so no one else can make a transaction with your money on your behalf

• con: your crypto isn't necessarily always on an exchange, so it would be hard to make frequent, short-term trades with your crypto

what is a private key?

a private key is a string of characters that looks something like this – 0xb46e06d (but longer)

• your crypto wallet has a public key/address that people use to send you money and allows you to receive it

• the private key is what's only visible to you that allows you to prove that you are the owner of the crypto involved in the transaction

some familiar examples are…

• custodial: binance, bitgo, bitmex, ftx (no longer…)

• non-custodial: metamask, trust wallet, exodus

ftx is a shxt show. i hope everyone is safe and unaffected by the fiasco!

💡 something im thinking about

wework is shutting down 40 us locations (click image)

that's all, folks 🐒

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as always, i’m no financial advisor! (i’m no substitute for professional financial services)