Generally speaking, there are two basic kinds of custody models when it comes to Bitcoin wallets:
<aside> 🏦 Like a bank, a Custodial Wallet is where the private keys to spend bitcoin are held and maintained by a third party. In this instance, you’re given permission to send & receive bitcoin.
<aside> 💵 Non-Custodial Wallets, sometimes called Self-custodial wallets, put you in charge of your private keys.
You are responsible for the security of your Bitcoin, as you are the bank.
Custodial wallets are used when you entrust a third-party to look after your Bitcoin. Usually, they are an exchange service - Examples include Binance, Bitfinex, FTX, Coinjar, Amber, Bitaroo, etc.
Fundamentally, the difference is between entrusting your money with a third party, versus trusting yourself with your own money.
<aside> ⚠️ “Not Your Keys, Not Your Coins”
It is often said that you should take the opportunity to learn how to take custody of your private keys. While perhaps daunting, it is important that you reduce the risk to your funds.
Most will leave their Bitcoin on an exchange until they are ready to use their own hot wallet.
<aside> 💡 Hot Wallets are exposed to the internet to easily facilitate transactions. Bitcoin Exchanges use Hot Wallets. Mobile & Desktop Wallets are usually Hot Wallets.
Exchanges, and yield-generating options are at the bottom of this page - but they come at a risk.
As this is page about keeping your Bitcoin safe, let’s look at the options you have to shift away from the risk of relying on a third party, and toward you being responsible for your own bitcoin.
The first two are basic wallets, and I would suggest that their best use is as an everyday wallet. You would keep as much bitcoin in these as you would in your regular wallet - not as a place to store your savings, nor how to store your bitcoin for long term holding.
They have an excellent blend & balance of security and ease of use.
Wallet of Satoshi
“It is a zero-configuration custodial wallet with a focus on simplicity and the best possible user experience.”
“Simple and powerful. Just like bitcoin. Muun is a self-custodial wallet for bitcoin and lightning.”
The following wallets are more powerful wallets,