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Custodial and Non-Custodial Wallets in an NFT Marketplace

Give social-login users custodial wallets and let crypto-native users bring their own. How Creative Social did both, and how to guard a recovery phrase.

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Getting Started With Digital Wallets

From 2022, when I was building Creative Social, an NFT marketplace for creators. The venture has since closed; the wallet design trade-off still applies.

The problem

A marketplace that sells NFTs has two kinds of customer. Some already have a crypto wallet and want to use it. Most don't, and won't install a browser extension and write down 24 words just to buy a piece of digital art. Support only one group and you lose the other.

Two kinds of wallet

Custodial: the platform, or a wallet provider it works with, holds the keys for the user. Sign-in is familiar — email or a social account — and the user never handles a key. The trade-off is trust: the user depends on the custodian to keep the keys safe and to let them move their assets out.

Non-custodial: the user holds the keys, usually in a wallet such as MetaMask, backed by a 12- or 24-word recovery phrase. Nobody can freeze or lose the assets on their behalf — and nobody can recover them if the phrase is lost.

What we built

  • Social-login users got a custodial wallet automatically, the first time they did something that needed one. For a creator, that was minting (publishing) their first NFT without a personal wallet connected.
  • Anyone paying by credit card used a custodial wallet, even if they had a personal wallet connected.
  • Crypto-native users could connect their own non-custodial wallet and use it throughout.

The effect: nobody needed to understand wallets to buy or sell, and people who did understand them gave up nothing.

If you hold your own keys

The recovery phrase is the wallet. Whoever has it controls the assets; lose it and they're gone.

  1. Keep it offline. Write it down. Don't store it in a file, a photo, a note app or a cloud drive. Many careful users never type it at all.
  2. Never share it. No legitimate support team, site or app will ever ask for it. Anyone who does is trying to take your assets.
  3. Store the copy somewhere safe and durable, protected from loss, fire and water, and consider a second copy in a separate place.