Bitcoin Self-Custody Series -Part 2: Custodial vs. Non Custodial Wallets
So now that we have an understanding of what Custodial is, what do these Custodial & Non-Custodial Wallets mean? Aren't all Bitcoin held in the same type of "Wallet"? The simple answer to these inquiries is, No. But that doesn't really suffice so let's break it down a bit further.
I think one of the best ways to look at the comparison of Custodial vs Non-Custodial Wallets is as a Postal Box at the Post Office vs the Post Box on the Front Lawn or at your apartment building. In this case, the Custodial Account is the Post Office & the Non-Custodial Account is the Postbox on your Front Lawn. In both cases, people can send you mail, but they don't work the same.
At the Post Office two people have keys, you & the Post Office. The Post Office can also stop your mail from reaching you since the Postal Box is actually theirs & you pay a rental fee to them to use it, you don't own it. This is a Custodial Service.
The Post Box on your Front Lawn on the other hand only has one set of keys & they are only held by one person, You. The Postman can place all the letters which have been sent to you in the Post Box, but he cannot open it, stop you from using it or stop other people from putting letters into it. This is a very basic description of a Non-Custodial Service, but will work for our purposes.
The Post Office is similar to the Custodial Wallet,since the Post Office has full control of your mail and you pay then a fee to use the box.
Your Postal Box is similar to the Non-Custodial Wallet, since you have personal control of the keys to your Postal Box.