Noncustodial wallets explained. What are the best hardware and software noncustodial wallets?

Cryptocurrency adoption is on the rise, and with it the vital question of how to securely store the keys that unlock access to these digital assets. While enthusiasts might point to the best noncustodial crypto wallets for maximum security and ownership, it can be daunting for beginners to dive right in without understanding the importance of custody. For starters, cryptocurrency storage falls under two broad categories: custodial and noncustodial storage solutions.

Custodial storages are wallets that cede control of your private keys to another party. You trust a third party to keep your assets secure and give you access whenever you need to trade them or move them somewhere else, an arrangement similar to keeping your money with a bank. While custodial wallets afford you convenience and ease of usage, trusting someone else with the security of your assets does come with the risk of loss. 

The safer alternative is a noncustodial wallet. This way you have sole control of your private keys and, by extension, your digital assets. But being in charge of your cryptocurrency means you are solely responsible for securing your keys and staying on top of the security of your assets. 

This article explores the best noncustodial wallets and the features that earn them that honor.

What Is a Noncustodial Wallet? 

A noncustodial wallet allows you to own and control the private keys to your cryptocurrency. This gives you full access to your funds.

The underlying principle is that users control the private keys to their accounts. The noncustodial wallet provider shouldn’t have any access to the keys, and therefore can’t freeze or manage your assets in any way. For clarification, wallets don’t actually store cryptocurrencies. They merely hold the private and public keys, and provide users an interface to interact with their digital assets, which are decentrally kept on the public ledger or blockchain.

This leads to the question: Why use a noncustodial wallet? 

While allowing a third party to manage and secure your cryptocurrencies is convenient, giving up control can create susceptibility to exit scams, hacking and theft.

Consider the instructive story of Mt. Gox, a leading Bitcoin exchange that filed for bankruptcy in February 2014. Mt. Gox announced that about 850,000 bitcoins belonging to customers and the company — valued at approximately $450 million then — were missing. A security audit revealed that the missing bitcoins were stolen directly from Mt. Gox cryptocurrency wallets starting in 2011.

Another custody disaster was the story of FTX, which used billions of dollars of user funds and eventually declared a chapter 11 bankruptcy, resulting in heavy losses to users who had funds inside FTX. Sales and usage of noncustodial wallets spiked greatly after this incident.

Apart from the catastrophic risk of loss stemming from handing over control of your assets to a third party, as illustrated by the Mt. Gox and FTX debacle, there are other reasons to use a noncustodial wallet.

A custodial wallet provider can impose a maximum withdrawal limit or unilaterally set fees for using their services. You can temporarily lose access to your crypto if the platform has technical issues. Basically, your assets are at someone else’s mercy if you don’t own your keys. After all, as they say, “not your keys, not your coins.”

On the other hand, a noncustodial wallet gives you complete charge of your hard-earned digital assets. You set your own rules and do with your funds as you wish. However, you alone are responsible for the safety of your keys. Hence, choosing from the best noncustodial wallets is critical.

What’s the Difference Between Hardware and Software Noncustodial Wallets? 

Hardware wallets are secure and simple devices that store your cryptocurrency offline so you can’t be hacked. Also known as cold wallets, they look like small external drives and are independent of online exchange platforms. Hardware wallets require you to plug them into a device before you can access your cryptocurrency.

Software wallets are applications that you can download on your computer or mobile device. They are also known as hot wallets as they are online and have more vulnerabilities than cold wallets. They store your private keys, and provide an interface for you to trade and manage your crypto. Software wallets are encrypted and require a password to access the keys that are stored in them but are susceptible to hacks from malware attacks.

When it comes to deciding between either of these best noncustodial wallets, investors tend to have differing opinions. By virtue of their offline status, hardware wallets are more secure than software wallets. Thus, these crypto wallets are better for storing large amounts of crypto. On the other hand, software wallets are connected to the Internet, so there’s a theoretical risk of possible breach or attack. However, they offer more convenience and are well-suited for users who transact frequently and need quick access to their assets.

Best Noncustodial Hardware Wallets 

The principle behind the best noncustodial hardware wallets that makes them superior security-wise is that they’re fully isolated. This separates them from your highly vulnerable computer or connected device. Here are the hardware wallets worth considering.

Ledger

When it comes to the best noncustodial wallets, Ledger is the most recognizable. It's the established and reputable company behind the popular Ledger suite of hardware wallets. Your Ledger wallet is accessed through Ledger Live, a proprietary free desktop app that enables you to send and receive cryptocurrencies and check your balance, and gives you complete control of all your Ledger devices. Ledger currently offers two hardware wallets: Ledger Nano X and Ledger Nano S Plus. 

Ledger Nano X: This is Ledger’s flagship wallet device. It’s remarkable for its ability to manage over 100 crypto assets simultaneously, and it supports over 1,800 tokens. The Ledger Nano X features an OLED display and Bluetooth support, which means you can confirm your transactions on the go without the hassles of connecting a USB cable. 

The Ledger Nano X is a bit pricey at $149, but it delivers solid security for your digital assets in a sleek and robust package. 

Ledger Nano S Plus: With an affordable price tag of $79, the Ledger Nano S Plus offers the best bang for your buck. It comes with a user-friendly interface and clean design and provides support for a wide range of cryptocurrencies. 

Learn how to set up a Ledger wallet

KeepKey

KeepKey wallet is a well-designed, although relatively large, hardware wallet from ShapeShift. It features an easy-to-use interface in a solid, durable device. KeepKey’s stand-out feature is an in-wallet crypto exchange that allows you to trade between cryptocurrencies without resorting to an external exchange. 

KeepKey stores all private keys with the industry-standard BIP32 protocol. For added security, KeepKey requires you to authorize each transaction manually, using a button on the device.

KeepKey currently retails for $49, which is an excellent deal, considering the wallet is feature-rich and beginner-friendly.

On the downside, KeepKey supports only 40 cryptocurrencies, far fewer than other best noncustodial wallets on this list for crypto storage.

Trezor

Trezor pioneered the best noncustodial wallet market with its hardware crypto wallet technology, and it consequently has a solid reputation in the industry. Trezor wallets are unique in that they’re the only hardware wallets to offer native support for ERC-20 tokens. On the flip side, updating the firmware on Trezor wallets often causes the whole wallet to be deleted. This can be scary for a new user; however, you can easily enter your backup phrase and restore your wallet quickly. Like Ledger, Trezor offers two hardware wallet devices: Trezor Model One and Trezor Model T. 

Trezor Model T: The Trezor Model T shares the same features as the Trezor Model One, except for its newly introduced large touchscreen. The touchscreen is an important upgrade since it allows users to enter their seed phrase directly on the device without going through a computer. Your computer could be infected with malware, which would make entering your seed phrase on it very risky. By only allowing you to enter the seed phrase through the touchscreen, the Trezor Model T removes all threats of hacking since the device isn’t connected to the Internet and is therefore malware-free. The Trezor Model T also supports more coins than the Trezor Model One. However, it’s a bit pricey at $219.

Trezor Model One: The Trezor Model One is the earliest hardware wallet on the market and still the most reputable. It features a clean design with a user-friendly interface and supports over 1,000 cryptocurrencies. You can get the Trezor Model One for $69, which makes it quite affordable.

Lattice1

Developed by GridPlus, the Lattice1 allow users to manage their crypto assets through a straightforward and protected interface.

Users will never lose access to their keys because the smart contract markup is both human-readable and accessible through a secure screen and a dedicated safe enclave. Cryptocurrency stored in your Lattice1 can be accessed by connecting it to a compatible software wallet, such as MetaMask.

In order to avoid being scammed, it is important that any transactions users sign is in a human-readable markup format, and Lattice1's touch screen will display verification requests with easy-to-read information. In addition to improving interactions with smart contracts, this more expressive interface also supports NFTs.

In summary, Lattice1 allows users to continue using MetaMask as they normally would, but with the added security of hardware encryption.

AirGap

AirGap is a cryptocurrency hardware wallet system that uses smartphones as hardware devices. It’s a two-step system that involves using your old smartphones that aren’t connected to the Internet to create your private keys, and to store and authorize transactions. A regular smartphone with Internet connectivity is used to prepare or initiate the transactions, which are then signed or authorized by the old smartphone. This system ensures a high level of security for your digital assets. 

AirGap functions with two applications — AirGap Vault and AirGap Wallet. The AirGap Vault is installed on the old smartphone. This smartphone shouldn’t be connected to the Internet — which makes it “air-gapped” and, therefore, more secure. The AirGap Wallet is installed on your regular modern smartphone with Internet connectivity and is used to initiate transactions and provide an interface for viewing your portfolio.

You can use these two apps on one phone, but for better security, it’s best that you use two different phones. Both apps are available on iOS and Android. 

BitBox

BitBox is a multisig, simple hardware wallet that’s designed with the beginner in mind. It features a unique backup system that uses a micro SD card, rather than a mandatory seed phrase. This makes the backup process one of the fastest among our list of best noncustodial wallets. Other cool features include a quick setup, an intuitive interface and a practical in-app guide. 

Compatible with Windows, Mac and Linux operating systems, BitBox currently supports BTC, ETH, ETC, LTC, and ERC-20 tokens.

BitBox ensures the safety of your digital assets with a host of excellent security features. Each transaction must be manually verified using a touch button on the device. You’ll also get two-factor authentication (2FA) and AES-256-CBC encrypted USB communication. The BitBox compact device retails for $149.

COLDCARD

COLDCARD is a multisig wallet from Coinkite, one of the oldest Bitcoin companies. The COLDCARD wallet is a Bitcoin-only custodial storage solution featuring micro SD backup, decoy wallets, pins, lockout timer and other great security tools. 

At just $120, COLDCARD boasts being the only hardware wallet to seamlessly support air-gapped operations. This means that you can set up your crypto wallet, fund it and transfer crypto without ever connecting the device to an internet-connected computer or device. 

The device is bulkier than most competitor hardware wallets, but its size accommodates a full numeric keypad, which makes COLDCARD easy to use. This makes it a viable choice among our best noncustodial wallets for those who prefer convenient hardware wallets.

Best Noncustodial Software Wallets

Although possibly less secure than hardware wallets, software wallets have the advantage of convenience. Users can freely buy, exchange and make purchases with crypto without leaving the app. Ultimately, software wallet apps are free to download, and are therefore ideal for beginners on a low budget.

MetaMask

MetaMask tops our list of the best noncustodial web3 wallets thanks to its incredible ease of use in setting up a wallet. As a software crypto wallet that’s also a browser extension, MetaMask can be accessed on popular browsers like Firefox, Chrome and Brave. MetaMask only supports Ethereum Virtual Machine (EVM) compatible blockchains, and it only stores keys for Ether and other ERC-20 and ERC-721 tokens. MetaMask also allows users to interact with DApps built on the Ethereum blockchain.

By using hierarchical deterministic settings to help users back up their accounts, these words and seed phrases guarantee convenience when you’ve lost access to your MetaMask wallet. A user can safely restore their lost account information by entering the seed phrases in the correct order. MetaMask code is open-source, which means it’s continuously upgraded. Another excellent feature is built-in coin purchasing. MetaMask connects to two exchanges, Coinbase and ShapeShift, where users can trade Ether, ERC-20, and ERC-721 tokens. 

In terms of security, MetaMask offers password encryption for your private keys, which remain stored on your browser and not on any remote server. This gives you complete control over your private and public keys. However, it’s still not as secure as a hardware or paper wallet, since it’s online. MetaMask is best used for storing small amounts of cryptocurrencies and tokens that you need to explore DApps on Ethereum.

There are also rumors of an upcoming MetaMask token that may be airdropped to MetaMask users.

XDEFI

XDEFI is a multichain wallet where users can safely store, transfer, and send crypto and NFTs across 15 blockchains.

What makes XDEFI convenient for users is that they are connected to multiple popular blockchains, including Thorchain, Avalanche, Terra, Bitcoin, and of course Ethereum, allowing users to perform unlimited cross-chain swaps and bridging for 10,000+ assets.

For NFT lovers, users can also easily showcase their Solana, Ethereum, Avalanche, Fantom, Arbitrum, Polygon, and BNB Smart Chain NFTs in a unified, fully-customizable gallery.

XDEFI Wallet was audited by Kudelski Security, and its security architecture is considered best in class.

The wallet also has a token known as XDEFI which can be staked, locking it up for extra rewards that come from fees generated from users swapping on the wallet. Each XDEFI staker also receives a non-fungible token (NFT) known as a "bXDEFI," which is short for "XDEFI Badge," and symbolizes their locked position in terms of size, bonus multiplier, and minimum duration. This NFT is also reflected in the XDEFI Wallet.

Gnosis Safe

Gnosis Safe is a multisig wallet where users have complete control over the administration of their own crypto assets, including the choice to implement 2FA for all transactions (hardware wallets, EOA-based wallets, paper wallets, or a combination of them).

This wallet is great for users who only have Ethereum assets and who value multi-signature safety. Gnosis Safe can store your ERC-20 tokens, ERC-223 tokens, and ERC-721 collectibles. The multi-signature and 2FA features of this wallet are particularly well-received by its users. The user-friendliness of this cryptocurrency wallet, as well as its ability to lend, earn, and store digital currency, make it a useful tool. There's a desktop version, but there's also a mobile app available in the Google Play Store and the Apple App Store for those who prefer that format.

Users of Gnosis Safe have the option of utilizing the platform's hot storage in addition to connecting with external offline storage. To use it, however, users will need to pay a deployment fee. To pay at this time requires 0.005 ETH. There is a trial version available for users to try out at no cost before making a final decision to buy.

The fact that the Gnosis Safe wallet can only store assets based on Ethereum is a potential drawback, however, it is now also available on Optimism, BSC, Polygon, Avalanche, and Arbitrum.

Coinomi

Coinomi is a trusted, multi-chain crypto software wallet that supports 125 networks and over 1,770 digital assets. It allows transfers through SegWit, which makes for lighter transactions. 

Coinomi offers direct DEX trading (token swaps), in-built exchange, and DApp and Web3 support. Additionally, Coinomi is available in over eight languages. 

Coinomi’s key security feature is why most users tout it as one of the best noncustodial wallets for crypto storage. Coinomi stores your private keys locally on your device rather than on its online servers. In this way, your keys are entirely under your control and not stored in a network that can be hacked. Protecting your assets is as simple as keeping your device away from malicious connections. 

The use of passwords further enhances Coinomi’s superb security. Even if thieves were to steal your device, they wouldn’t be able to gain access without the password you’ve set up. 

ZenGo

ZenGo claims to be the first of various best noncustodial software wallets to support multiple cryptocurrencies. ZenGo wallet is available on iOS and Android, and is easy to set up and use. ZenGo supports Bitcoin, Ether and Binance coins, and allows you to trade or earn interest on these cryptos for a fee. It also provides the convenience of buying crypto with a credit card or Apple Pay. 

When compared with other best noncustodial wallets, ZenGo stands out because of its threshold signatures scheme. It’s an innovative, high-level security feature that splits your private key into two parts. It stores one part on its servers and the second part on the user’s phone. A transaction can only be consummated when the two parts interact. 

ZenGo stores a user’s private key share on their cloud storage and uses facial recognition to restore the key if the user loses their device. 

The ZenGo app offers these innovative security features in a clean, simple user interface that’s been designed with newbies in mind.

BitPay

BitPay is an open-source, noncustodial Bitcoin wallet that combines high-grade security and convenience for trading and holding BTC. It allows users to buy and sell Bitcoin through an integrated exchange. Moreover, the BitPay wallet distinctively features a BitPay Visa Card, which converts BTC to USD and is globally accepted by merchants and ATMs. It’s this Visa Card that makes BitPay a prime choice for best noncustodial wallets if you’re someone who regularly transacts with crypto.

BitPay offers multisig functionality, which allows the user to verify transactions on multiple devices up to a maximum of 12. BitPay also supports 2FA authentication using Google Authenticator, and protects shoppers with Payment Protocol to further secure their assets Payment Protocol secures payments made to unknown addresses by verifying them.

The BitPay app is well-designed and intuitive, making it suitable for beginners. The built-in exchanges and Visa Card are ideal for users who transact frequently. 

BRD (Breadwallet)

Don’t mind trying one of the best noncustodial wallets that’s optimized for mobile use? BRD (formerly Breadwallet) is a mobile-only wallet developed for both Android and iOS devices. Although it’s a Bitcoin wallet, BRD allows you to convert your BTC to ETH, BCH and ERC-20 tokens. The app is well-optimized for mobile and is easy to use. However, underneath the simple skin lies a host of advanced security features. 

BRD uniquely uses Simplified Payment Verification (SPV), which connects users directly to the Bitcoin network. Aside from improving transaction speed, this direct connection enhances security as there are no servers to hack. Other notable security features include AES hardware encryption and code signatures, Touch ID, and a 6-digit PIN for extra security.

Edge

Edge is a mobile-only software wallet available on iOS and Android. The app is easy to use and offers convenient features with ShapeShift Integration, such as buying, exchanging and spending crypto.

Overall, Edge is one of the best noncustodial wallets because its security features are advanced. Client-side encryption ensures your data is heavily encrypted on the device before it reaches the wallet’s servers. This makes Edge impervious to server-side and malware attacks. Furthermore, only the user has access to account information. Edge supports the popular Google 2FA Authenticator, meaning that if bad actors get hold of your password and username, they still won’t be able to access your account.

Edge supports over 31 coins. It has all the proper security and privacy features to make it one of the best noncustodial wallets to store crypto.

Trust Wallet

Ask anyone what’s the best noncustodial wallet they recommend and you’ll likely hear of Trust Wallet. It is Binance's official wallet and is built for convenience. Trust Wallet makes it easy to manage and secure your cryptocurrencies. It’s available for iOS, Android and desktop.

Trust Wallet offers users multiple options to buy crypto, including cards, and supports a wide range of cryptocurrencies. You can stake your crypto for interest and exchange it instantly while maintaining utmost privacy and security. You can track prices and charts without leaving the wallet.

Trust Wallet also allows you to view your NFTs, art and collectibles in a single place. You can use your favorite DApps and explore new ones on the Trust Wallet platform.

The app employs fingerprint and PIN code scanning for an extra layer of security. Trust Wallet doesn’t store users’ data on its server. Rather, it allows users to store data on their devices, putting them in full control of their keys.

Trust Wallet has over 25 million downloads, supports 65 blockchains and over 4.5 million digital assets. Overall, it’s a secure and versatile software wallet that’s ideal for most types of users.

The Bottom Line

All in all, the best noncustodial wallets connect you directly to either a blockchain or noncustodial exchange. This lets you have complete control of your keys, and third-party interference is very minimal. Apart from being more secure, noncustodial storage allows you to transact anonymously and reduces third-party risk. You also have the freedom to buy crypto directly, giving you access to more cryptocurrencies.

Source: Best Noncustodial Wallets for Convenient and Secure Crypto Storage | Bybit Learn