Custodial Wallet
Quick Answer
A custodial wallet is a cryptocurrency wallet where a third party holds and manages the private keys on behalf of the user, offering convenience but introducing counterparty risk.
Full Definition
A custodial wallet is a cryptocurrency wallet where a third party (such as an exchange or payment provider) holds and manages the private keys on behalf of the user. The user trusts the custodian with their funds. Custodial wallets offer convenience (password recovery, simplified UX) but introduce counterparty risk. Custodial arrangements may require regulatory licensing depending on jurisdiction.
Related Terms
Chargeback
A chargeback is a forced payment reversal initiated by a cardholder's bank. Crypto payments are chargeback-free by design because blockchain transactions are irreversible once confirmed.
Cold Wallet
A cold wallet is cryptocurrency storage not connected to the internet, providing maximum security against hacking. Examples include hardware wallets like Ledger and Trezor.
Confirmation Time
Confirmation time is the duration between a transaction being broadcast and receiving its first block confirmation. It ranges from under 1 second (Solana) to 10 minutes (Bitcoin).
Consensus Mechanism
A consensus mechanism is the protocol by which a blockchain network agrees on the state of the ledger. Common types include Proof of Work (Bitcoin) and Proof of Stake (Ethereum).
Cross-Chain
Cross-chain refers to interoperability between blockchain networks, enabling asset transfers across them. Essential for multi-chain payment gateways that accept payments from any supported chain.
Crypto Payment Gateway
A crypto payment gateway is software that enables merchants to accept cryptocurrency payments and receive settlement in fiat or stablecoins. It handles wallet connection, exchange-rate conversion, and payout.