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Custodial Wallet | Bitcoin Glossary | Mapping Bitcoin

Custodial Wallet

Segurança

Also known as: hosted wallet

A Bitcoin wallet where a third party holds and controls the private keys on behalf of the user. While convenient, custodial wallets require trusting the provider with your funds and are subject to counterparty risk.

Overview

A custodial wallet is a Bitcoin wallet service where the provider, not the user, controls the private keys. This is similar to how a bank holds money on behalf of depositors. The user accesses their bitcoin through the provider's platform (typically a website or mobile app) but does not have direct control over the underlying keys.

Custodial vs Non-Custodial

┌──────────────────────────┐    ┌──────────────────────────┐
│    CUSTODIAL WALLET      │    │   NON-CUSTODIAL WALLET   │
│                          │    │                          │
│ Provider holds keys      │    │ User holds keys          │
│                          │    │                          │
│ ✓ Easy to use            │    │ ✓ Full control           │
│ ✓ Password recovery      │    │ ✓ No counterparty risk   │
│ ✓ Often free             │    │ ✓ Censorship-resistant   │
│                          │    │                          │
│ ✗ Counterparty risk      │    │ ✗ User responsible for   │
│ ✗ Can be censored        │    │   backup and security    │
│ ✗ May require KYC        │    │ ✗ No password recovery   │
│ ✗ "Not your keys,        │    │                          │
│    not your coins"       │    │ Motto: "Be your own bank"│
└──────────────────────────┘    └──────────────────────────┘

Risks

The primary risk of custodial wallets is counterparty risk: the possibility that the provider loses, steals, or is forced to freeze your funds. Notable examples include:

  • Exchange hacks: Mt. Gox (2014), Bitfinex (2016), and others resulted in users losing bitcoin held in custodial accounts
  • Regulatory seizure: Governments can compel custodians to freeze accounts or hand over funds
  • Insolvency: If the custodian goes bankrupt, user funds may be treated as part of the bankruptcy estate (as seen with FTX in 2022)

When Custodial Might Be Acceptable

Despite the risks, custodial solutions serve legitimate purposes:

  • Onboarding: New users who are learning about Bitcoin may start with a custodial service for simplicity
  • Small amounts: Lightning custodial wallets like Wallet of Satoshi provide a low-friction entry point for small payments
  • Institutional requirements: Some businesses have regulatory obligations that require licensed custodians

The Path to Self-Custody

The Bitcoin community broadly encourages users to transition from custodial to non-custodial solutions as they gain confidence. The common saying "not your keys, not your coins" emphasizes that true ownership of bitcoin requires holding your own private keys, whether in a software wallet, hardware wallet, or cold storage setup.

Termos Relacionados

Non-CustodialSegurança

A wallet or service where the user retains full control of their private keys and does not rely on a third party to hold funds. Non-custodial solutions embody the Bitcoin principle of 'not your keys, not your coins.'

WalletGeral

Software or hardware that manages Bitcoin private keys, generates addresses, creates and signs transactions, and tracks balances. Wallets range from simple mobile apps to complex multi-signature setups and do not actually 'store' bitcoin, which exists only on the blockchain.

Hot WalletSegurança

A Bitcoin wallet connected to the internet, offering convenience for frequent transactions but with greater exposure to potential hacks and malware. Hot wallets are suitable for smaller amounts used in day-to-day spending.

KYCGeral

Know Your Customer, regulatory requirements that compel financial service providers to verify the identity of their users. In the Bitcoin space, KYC typically involves providing government ID and personal information to exchanges, which raises privacy and surveillance concerns.