Ever wonder where and how your cryptocurrency is kept? Token holders can keep their cryptocurrency in a variety of wallets. However, they can be broadly divided into two groups: custodial wallets and non-custodial wallets.

A custodial wallet is a service that keeps your assets in its possession and is the owner of the private key to your wallet. Using a non-custodial wallet, such as Alluo, on the other hand, gives you sole ownership of your assets.

How do crypto wallets work?

A cryptocurrency wallet is a tool that enables communication with a blockchain network. You can use it, among other things, to access decentralised applications or transfer and receive cryptocurrency. Cryptocurrency wallets technically don't actually hold your digital assets. Instead, they produce the information you require to use crypto. However, it's simpler to conceptualise it as the former so we will continue to talk about it this way.

Among other things, a crypto wallet is made up of two main components – a public key and a private key. People can transfer you cryptocurrency by making a transaction to one of your addresses, which were created using the public key of your wallet.

You can share your public key and wallet addresses with other people (hence the term public). However, because it signs transactions and grants access to your cash, your private key should be handled as a secret password. You can access your crypto from any device as long as you safeguard your private key. You can find yours in the account section of your Alluo mobile app.

Although cryptocurrencies are digital, the private and public keys that they contain can be stored in a variety of ways, including printed on paper, in app and desktop wallet software, or offline in hardware wallet devices. It is critical to NEVER share your keys with anyone, or to store them in an unencrypted electronic format such as word documents. But whatsoever wallet style you choose, you will always have either a custodial or non-custodial wallet.

What is a custodial crypto wallet?

A custodial cryptocurrency wallet is one where your assets are kept in custody on your behalf. This means that your private keys will be held and managed on your behalf by a third party. In other words, you won't be the sole party with control of your funds nor will you be able to sign transactions.

What is a non-custodial crypto wallet?

In a non-custodial crypto wallet, the private keys are held and managed solely by the wallet's owner, providing complete control over their money. Unlike custodial wallets, or even a traditional bank there is no risk of your funds being frozen or misappropriated by a third party.

In addition, having a non-custodial wallet gives customers the opportunity to interact with decentralised exchange s(DEX) and decentralised applications (DApps).

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