Hosted Wallet
A hosted wallet is a wallet where a service holds the private keys on the user’s behalf. The user sees a balance and can instruct a transfer, but the provider is the party that signs, and the provider’s records are what the balance actually rests on.
Also called: custodial wallet
Most people’s first crypto balance sits in a hosted wallet: an exchange account, a broker app, a payment provider’s wallet product. The customer has a login and a balance. The provider has the keys.
Mechanically, the balance on screen is a line in the provider’s own ledger, not necessarily an address on a chain. Providers commonly hold customer assets together in a small number of on-chain addresses — an omnibus arrangement — and settle transfers between their own customers by editing internal records without touching the chain. Whether those assets are kept apart from the provider’s own, and whether the internal records reconcile to what is on chain, are questions no block explorer can answer.
The consequences run in both directions. The provider can freeze an account, act on a court order, close the relationship, or fail. It is also the party a regulator can instruct, which is why a hosted wallet is normally where crypto custody obligations attach.
In practice
Because the provider can move the assets, a hosted wallet is normally what brings the provider into licensing scope. For the customer it means the balance depends on the provider’s solvency and record-keeping, not on an address they control.
Example
An exchange holds the assets of 50,000 customers in a handful of on-chain addresses. A customer’s 2 ETH is a row in the exchange’s database, and a transfer to another customer of the same exchange changes two rows and nothing else. The chain shows one large balance that moves rarely. It does not show who is owed what out of it.
Commonly confused with
| Term | How it differs |
|---|---|
| Unhosted Wallet | In an unhosted wallet the user holds the keys and no firm can sign; a hosted wallet puts a firm between the user and the chain. |
| Crypto Custody | Custody is the control relationship; a hosted wallet is one consumer-facing product through which that relationship is delivered. |
See also
- Crypto CustodyCrypto custody is holding someone else’s crypto-assets, or the means of access to them, in a way that lets you move them. The test is control in fact — who could move the balance without the customer’s cooperation — not how the service describes itself in its terms.
- Unhosted WalletAn unhosted wallet is a wallet whose private keys are held by the user, with no service in a position to move the funds. Regulators use the term mainly to describe the far end of a transfer: a counterparty that is a person and a device rather than a firm.
- Self-CustodySelf-custody is an arrangement in which the user alone holds the private keys and no service can move the assets. A provider may build the wallet, host the interface and broadcast the transaction, but if it cannot produce a signature, the balance is beyond its reach.
- Omnibus AccountAn omnibus account is a single bank account holding the funds of many underlying customers together, with the operator keeping the sub-ledger that records who owns what. The bank deals with one account holder and sees one balance.