Custodial Wallet
a.k.a. Custodial wallets, Hosted wallet
A wallet where a company, usually an exchange, holds the private keys and so controls the coins for you.
With a custodial wallet, someone else holds the private keys. When you buy crypto on an exchange like Coinbase or Binance and leave it there, the exchange holds the keys and your account shows a balance that it owes you.
It's easy: forget your password and support can help you back in. But you're trusting the company to stay honest, solvent and unhacked. When FTX collapsed, customers found out the hard way what that trust is worth. The alternative is a non-custodial wallet, where you hold the keys yourself.
Leaving a large stack on an exchange for years because it's convenient, without asking what happens if the exchange fails.
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