What are custodial and non-custodial wallets?

A custodial wallet uses a provider to manage private keys. With a non-custodial wallet, key control is not entrusted to that provider; users are responsible for their authorization and recovery arrangements. Self-custody is another term for this approach.

How does custody responsibility differ?

Withdrawals from a provider-managed account depend on the platform’s access and transaction processes. With your own keys, signing control rests with you, along with responsibility for backup and signing errors. Coinbase’s explanation of the two models describes the distinction.

Example

A platform may offer account recovery when you forget its password. Losing both key access and the required backup in a seed-based self-custody setup cannot be solved the same way. Having control is not protection against every loss.

The app interface does not prove who controls the keys

Two phone apps can use different custody models. Hot versus cold refers to exposure of keys to an online environment; it does not mean the same thing as custody responsibility.

For distributed-key or social-recovery arrangements, look beyond the login screen. Documentation should explain whether the provider can transact alone, who can recover access and what happens if the service stops.

The wallet selection checks separate access and recovery questions when assessing which custody arrangement meets your needs.