What is the difference between a custodial and self-custody wallet?
A custodial wallet is a wallet where private keys are held by a third party in order to manage funds on your behalf. Using a custodial wallet typically means you have to go through a KYC (Know Your Customer) process and submit various documents to complete onboarding. KYC is a way to identify and confirm that a customer is who they say they are.
In the case of Gryfyn, Hex Trust is the custodian.
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A self-custody wallet is a wallet where your private keys are stored locally on your device, giving you full control over your funds. It’s also known as a self-custody wallet because you are the only one holding the private keys. Your 12-word recovery phrase allows you to access and manage your funds and connect to any self-custody wallet. This should be backed up safely and never shown to anyone.
Anyone can sign up for a self-custody wallet, even if you don’t have an email address or a bank account.
Navigating the permissionless structure of blockchain can be challenging if you are not ready to read coding language. This is because every single transaction that occurs must be verified by you and approved by you. These transactions then interact with the smart contract to make allowances for what you allow your wallet to engage in and what your assets can do.
The problem that exists right now is that without proper understanding of what the smart contracts and transactions say, a user may find themselves vulnerable to malicious actors who write into the code ways to hack or steal into the contracts. In fact, in 2022 alone, $4 billion was hacked from crypto investors, and these include people who have been interacting with the space for a while.
Gryfyn’s custodial solution through Hex Trust offers a licensed and regulated trading experience. This means that users can make sure that their Web3 experience does not fall into legal issues, and their assets are not able to be hacked.
Gryfyn filters all transactions to check for vulnerabilities (like an antivirus software!) decodes the messages so that you can actually read what you’re signing.
By keeping your private keys safe for you, Gryfyn prevents the easiest ways that hacking occurs, where hackers trace vulnerabilities from iCloud storage to WiFi connections to obtain your private key. It also helps you in case you lose your private key.
Comparing custodial and non-custodial wallets