Custodial wallet is a crypto wallet service offered by a centralized service such as a centralized crypto exchange. Custodial wallets have several benefits, such as less user responsibility regarding private key management. When users outsource wallet storage to a single platform, they are essentially entrusting their private keys to that institution.
When users want to send coins from a custodial wallet, they simply log in to the platform with their username and password, enter the address to which the coins are sent, and the platform will be responsible for entering the private key to complete the transaction.
Custodial wallet simplifies the process of storing and also crypto transactions for users who do not want to store their private keys themselves. However, custodial wallets also carry a lot of risk and are vulnerable to hacking.