Non-Custodial Wallets- Your direct link to the blockchain

“No private key, no crypto” is the statement that users need to understand in the crypto world. In simpler terms, the user needs to know that the holder of the private key will have access to the crypto funds. Earlier, we discussed custodial wallets, where a third-party wallet stores the user’s cryptocurrencies and also holds the user’s private key. In terms of ease of operation, these wallets are the best, whereas in terms of safety somehow they don’t fulfill the eligibility criteria. Then who fills this eligibility? It’s decentralized, also known as a non-custodial wallet.

The non-custodial wallets are the type of wallets using which the users can directly access the blockchain. At the time of registration, the user is given a private key to access their wallet, after sharing this key with the user the non-custodial wallets erase these keys from their database permanently. Hence, only the user comprises the private key to their wallet. So, does this eliminate all kinds of vulnerability to the crypto funds? In this chapter, we will be covering what are non-custodial wallets, their need and working, how to develop a non-custodial wallet, the advantages and disadvantages, and the future estimation of decentralization.

As the name suggests, non-custodial wallets are the ones in which no one holds custodial of the private key apart from the user. Here, the user comprises complete control of the private keys and so, on their funds. While allowing a third-party custodial wallet to manage and store your crypto is convenient, giving up control of your private key is not an effective way. Giving up control of the private key can increase vulnerability to hackers and data breaches.

The private key helps the user to perform transactions like sending and receiving the crypto. However, as the user is the sole owner of the private key here, their responsibility for securing and backing up the private key also increases.

Working of the Non-Custodial Wallets:

From the user’s perspective, the working of non-custodial wallets is very simple as they don’t require any type of identity verification or registration. The user can simply access the services of the wallet by setting a username and a password. The wallet will provide the user with a recovery phrase or seed phrase that the user needs to keep private and secure. The main advantage of decentralized wallets is that it comprises the seed phrase that works as a recovery phrase or backup phrase, using which the user can access the same wallet irrespective of the non-custodial wallets. For instance, the user can access their crypto funds using any non-custodial wallet like MetaMask and Trust wallet.

Why should you use a Non-Custodial Wallet?

The concept of blockchain was introduced in 2008 to serve as the public transaction ledger without any centralized authority. The need for decentralization was to minimize the distribution of dependency and control of decision-making from the centralized point. For instance, in custodial wallets, if the wallet gets held by the government for compromising any regulation or in a fraud case, the user’s funds are also gone. Here, the user is completely dependent on the custodial wallet for security, which is implemented by a centralized authority. On the other hand, non-custodial wallets allow users to be the sole owner of their crypto funds. They can use, manage, access, and store their funds depending on their needs without any government involvement, regulations, or monitoring. Further, it provides pseudo-anonymity to the users as the non-custodial wallets don’t require complete identity verification or KYC. Looking at these points, the user should consider using a non-custodial wallet.

How to build a Non-Custodial Wallet?

The PrimaFelicitas is one of the best Cryptocurrency Wallet Development Companies that offer exceptional features such as Public Key Auto Generation, Recurring Invoicing, Optional Session logout, Trading Suggestions, Duplicate Payment Auto Denial, Two-Factor Authentication, etc. It includes an efficient team of experts with credible experience in the blockchain field. Furthermore, it provides an impeccable custom wallet that offers bank-grade security for faster payment solutions.

Does a Non-Custodial Wallet require user verification?

No, the non-custodial wallets don’t require the user to complete any identity verification as compared to the custodial solutions. In custodial solutions, the user is required to complete the identity verification by submitting authorized documents like a PAN card and Adhar card. After completing the identity verification only they can utilize the services of the wallet. However, in the non-custodial wallet, the user can instantly start performing transactions as there no verification is required. The non-custodial solutions facilitate users to perform transactions anonymously, hence fulfilling the key feature of blockchain.

Features offered by a Non-Custodial Wallet:

  1. Sole ownership: The primary key feature that non-custodial wallets facilitate is that it allows the user to be the sole owner of the wallet. The non-custodial wallet doesn’t store private keys in its database. In case, the non-custodial wallet company gets closed due to fraud or any rule violation, the user’s funds are still safe. They can simply back up the data into another non-custodial wallet using the seed phrase and can easily access their funds.
  2. Accessibility of funds: Here, the users can directly access their funds on the blockchain. In the case of a custodial wallet, there is no actual movement of funds on the blockchain until the user withdraws the crypto from it. However, in the non-custodial wallet, every transaction actually reflects on the blockchain.
  3. High security: Another important feature provided by the non-custodial wallet is security. As the private key is only known by the user, the chances of it getting compromised in any data breach are zero. However, this also increases the responsibility of the user to keep the private key secured as the user becomes a single-point failure.
  4. No KYC required: Lastly, the non-custodial wallet also provides fast services to start with as there is no requirement of completing identity verification or KYC. The user can instantly start performing transactions just by logging in by setting a username and password. This also establishes anonymity as the transactions are linked to the address generated by the private key of the user, and not by their username or password.

Features offered by NCW

Are there any drawbacks to using Non-Custodial Wallets?

Yes, as every process has its pros and cons, there are several disadvantages to using non-custodial wallets. The blockchain is open to all users; even hackers can’t be banned from using it. Its transparent nature makes it more vulnerable to hackers as each record resides publically on the ledger. Further, the anonymity of users makes it easier for hackers to perform attacks and go without any clue. The following are a few drawbacks the user should know before using it:

  1. No reverse action is possible: The non-custodial wallets allow the user to perform transactions directly on the blockchain, where the blockchain is irreversible and permanent. This signifies that if the user has performed a transaction it can’t be reversed. Therefore, a small mistake can end up in a large crypto loss.
  2. Not for beginners: The non-custodial wallets are not beginner-friendly as they require prior knowledge of cryptocurrencies to be operated. The user interface of non-custodial wallets seems to be a bit complex as compared to the daily-use online bank wallets like Paytm. Hence, before trying the non-custodial wallets it is recommended to have a basic knowledge of the crypto world.
  3. The transaction fee is high: The transaction fee of the non-custodial solution is high as compared to the custodial solutions because it includes the mining fees also.
  4. Transaction speed is slow: On average, the miner requires 10 minutes to perform verification and hence, a transaction. Moreover, Visa enables 2000 transactions per second that permit liquidity.

Non-Custodial Wallets versus Custodial Wallets:

The biggest question that often confuses users is the difference between custodial and non-custodial wallets. So, let’s start by differentiating both types of wallets on the basis of some key points:

  1. Ownership of the private key: The custodial wallet as the name signifies is the type of crypto wallet in which the private key is held by the third-party custodial. However, the non-custodial wallet is the type of crypto wallet in which the user is the sole owner of the private key. Once the keys are generated at the user’s end, they are deleted permanently from the service provider’s end. Hence, making the user the only owner of the wallet.
  2. Backup recovery facility: The custodial wallet provides the facility of backup recovery in case the user loses the login credentials of the wallet. Whereas, the non-custodial wallet can’t be restored in case of loss of the private key and seed phrase. This is because, in a non-custodial wallet, only the user comprises the private key of the wallet, which also increases the responsibility of the user to keep the private key and seed phrase securely.
  3. Security: In terms of security, the non-custodial wallet provides more safety as compared to the custodial wallet. This is because, in the non-custodial wallet, no third-party custodian stores the user’s private key and hence, secures it from any kind of data breach or hacking attacks.
  4. The anonymity of the user: The custodial wallet requires the users to verify their identity by completing the KYC. Without verification, the custodial wallets don’t provide services and hence, it is mandatory. However, the non-custodial wallets don’t require any kind of KYC to be completed. The user can directly start using their service just by creating a username and a password.
  5. User-friendly interface: In the end, the custodial wallet provides a more user-friendly interface. These wallets are similar to common online banking applications like Paytm or PayPal applications. However, non-custodial wallets are seen as more complex and less user-friendly.

Custody wallet vs Non-custody wallet

Is non-custodial the future of crypto?

Yes, non-custodial or decentralized wallets are the future of the crypto world. As we started this blog with the statement “No private key, no crypto”, which is very essential to be understood. When we look into the main cause of the development of blockchain technology, we get to know that it was created to attain a level of decentralization in our financial world. Nowadays, it has become difficult for an individual to trust the banking system. However, if the user becomes its bank itself, it would be more trusting and secure. To implement this concept decentralization was introduced. It was implemented to create a system that was not controlled by any centralized authority. Further, to accomplish this system completely the user requires to opt for the non-custodial wallets.


Summarizing the entire blog, we can say that non-custodial wallets are way more beneficial than using custodial wallets. It has become a need as per the growing number of hacks and controversial exchanges; the users are required to know the importance of using non-custodial wallets.  There is no third-party custodial or middleman in between, which increases the security by keeping the hackers and undesirable activities away from the crypto funds.

However, we also saw that non-custodial doesn’t eliminate all vulnerabilities. The user requires gaining a level of knowledge to implement the non-custodial wallets. This also increases the responsibility of the user to keep their crypto assets secure. For keeping it secure, it is recommended that the private key should be kept encrypted in different pieces, such as using the multi-signature feature, in different positions. This ensures that even if the hackers are able to retrieve one part of the private key, they still need the rest to access the funds. Hence, by combining several features we can obtain an efficient and secure non-custodial wallet.

Going forward, we will be exploring multi-party computation wallets and will see how it enhances the security of the private key. Stay connected!

Looking for help here?

Connect with Our Expert for a detailed discussion

Post Views: 7

Post navigation