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Custodial Wallet

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Table of contents
    1. 0.2. How Custodial Wallets Work
    2. 0.4. Why Custodial Wallets Are Used

A custodial wallet is a type of cryptocurrency wallet where a third party—such as an exchange or wallet service provider—holds and manages the user’s private keys. This means the user does not have full control over their crypto assets, as access depends on the custodian.

How Custodial Wallets Work

When using a custodial wallet, users can send, receive, and store cryptocurrencies without managing private keys themselves. The service provider takes responsibility for securing funds, often offering account recovery options and user-friendly features.

Why Custodial Wallets Are Used

Custodial wallets are preferred by beginners and mainstream users because they simplify the crypto experience. They reduce the risk of losing assets due to mismanaged private keys. However, this convenience comes with a trade-off: users must trust the custodian not to misuse or lose their funds.