The difference between hosted and non-hosted wallets lies mainly in control, security, and responsibility. A hosted wallet, also known as a custodial wallet, is managed by a third-party service such as a cryptocurrency exchange. In this type of wallet, the provider holds and controls the private keys on behalf of the user. This makes it easier for beginners, as the platform handles security, backups, and recovery processes. Users can access their funds with simple login credentials, similar to online banking.

In contrast, a non-hosted wallet, also called a non-custodial wallet, gives full control of the private keys to the user. This means the user is entirely responsible for securing their funds, managing backups, and protecting their recovery phrase. While this provides greater independence and privacy, it also increases the risk of losing funds if the keys are lost or compromised.

Hosted wallets are generally more convenient and user-friendly, making them ideal for new users or frequent traders. However, they carry custodial risks, such as hacking or platform failure. Non-hosted wallets, on the other hand, offer higher security and control, as users are not reliant on any third party.

In summary, hosted wallets prioritise convenience and ease of use, while non-hosted wallets emphasise control, privacy, and personal responsibility in managing digital assets.