NFT or non-fungible tokens are all set to become the next big thing in the space of decentralized finance. Many artists are showing interest in selling their original memorabilia as NFTs directly to their fans/investors without losing their creator status. In fact, many have already sold their art for millions of dollars. However, were you aware that NFT storage and trading are only possible with the assistance of custodial and non-custodial wallet services?
The article takes you on a tour of important queries like what is NFT crypto to how NFT projects need custodial and non-custodial services. So, let us read ahead.
Table of contents
- A detailed overview of NFTs
- Custodial Wallet
- Non-Custodial Wallet
- What are the critical dissimilarities in NFC marketplaces?
- Closing Thoughts
A detailed overview of NFTs
As per the NFT expert team, NFT represents a digital ownership certificate for all kinds of virtual items pegged in as NFT. Some of the examples of NFTs include music, artworks, collectables and so on. Note that every NFT asset has its unique coding that no one can change or delete and is one-of-a-kind. Due to the scarcity in the market, users tend to invest in such NFTs frequently with huge amounts.
Basically, in NFT trading, one needs to upload their digital creation to a reliable NFT marketplace. Further, the creator can sell their NFT files in exchange for crypto coins. In addition to this, blockchain’s feature, the smart contracts allow the exchange of digital assets without the inference of any centralized authority. Hence, NFTs are open to a huge audience for performing transactions.
Further, you’ll encounter two types of wallets: non-custodial and custodial. However, before we move ahead to explore these wallets, note down a few important components of a crypto wallet.
These wallets contain two identifiers that are completely unique: public and private keys. As per NFT developer professionals, public keys act as an email address. With its help, senders can detect the digital address to where they want to transfer cryptos.
Next, the private key acts as a password in the blockchain network. The prime job of a private key is to verify transactions for crypto senders. Also, it is important to note that once a user loses their private keys, they won’t be able to access and transfer the crypto-coins from their wallet. Take up NFT training to understand this mechanism in a better way. Now, let’s understand custodial wallet and non-custodial wallet services.
The private key for the custodial wallet is authorized to a 3rd-party or custodian. Here, the main responsibility of a custodian is to protect the key and wallet owner’s assets. With a custodial wallet, the owner can extend the controlling access to the custodian. NFT developer professionals say that a few custodial wallets enable owners to store crypto assets but not private keys. On the other hand, many custodial services allow owners to have complete control over their wallets along with their private keys.
Furthermore, custodial wallets are known to be user-friendly and require easy steps to set up. In addition to this having a third-party custodian assistance takes a very large burden of memorizing the long and complicated private key. And the best part is owners can even recover misplaced data without any hassles.
However, there are some of the limitations that you will encounter with a custodial wallet. One of them is the lack of appropriate privacy. Since to complete KYC formalities, users need to submit their personal documents. In this scenario anonymity of the users comes at stake. There are many things to learn about a custodial wallet, and for it, you will need to take a reliable NFT training course.
With a custodial wallet, one can get complete control of their non-fungible token ownership. Hence, it indicates that owners will not only get access to funding transactions, but also they will be able to trade NFTs.
However, you would need to remember the complex passwords for your wallet as there will be no third-party custodians. Also, if you lose any piece of information regarding your passwords, you will lose all access to your wallets and accounts. Hence, it is known as one of the major drawbacks of using a non-custodial wallet.
Also, note that these wallets suit best for experienced investors, and new users might find it difficult to work with its interface. However, there are also a few benefits of using a non-custodial wallet. One of them is users get to pay the transaction fee of their choice by using the appropriate transaction speed.
What are the critical dissimilarities in NFT marketplaces?
Similar to NFTs, its marketplaces can also be of two kinds: custodial market and non-custodial market. In general, only a few marketplaces except custodial NFTs due to the intervention of third parties on transactions. Also, custodial marketplaces tend to curate themselves very carefully, and chances are you won’t find some NFTs on them.
On the other hand, non-custodial marketplaces do not have any censorship on anyone. It showcases the complete collection of NFTs to each potential buyer. Aside from this non-custodial wallet protects the anonymity of every user and provides them with a platform to connect with one another.
Being aware of such differences between both wallets is crucial as the majority of investors do not know about these options. In fact, with the knowledge, they can outsource a few responsibilities. Having the right information allows users to determine how they wish to manage their NFTs and store them securely.
Since the headlines regarding digital creators earning millions of dollars for their NFT arts pop up every other week, many people want to try their luck too. However, the process is not as straightforward as it sounds. Thus, We advise you to take up NFT training courses for more knowledge.
Check out the NFTically to learn more about NFTs and their marketplaces. The platform will provide you with robust NFT training sessions.