Custodial Wallet

A custodial wallet, also known as a hosted or centralized wallet, is a type of cryptocurrency wallet where the private keys are held and managed by a third party, typically a centralized organization such as a cryptocurrency exchange, a wallet provider, or a financial institution.

With a custodial wallet, the user entrusts their private keys to the custodian, who is responsible for managing and securing them. Users can access their funds by logging into the custodian's platform or by providing authentication credentials. The user can also perform transactions, such as buying, selling, or sending cryptocurrency, through the custodian's platform.

Custodial wallets offer a level of convenience for users as they don't have to worry about managing their private keys or the security of their funds. However, it also poses a security risk as users are entrusting their private keys to a third party, which can lead to potential breaches or theft if the custodian's security is compromised.