Non-custodial and custodial are terms commonly used in the context of blockchain and

cryptocurrency to describe different approaches to managing and securing digital

assets. These terms refer to how control and ownership of the assets are handled.

​ Non-Custodial: In a non-custodial setup, individuals have complete control and

ownership of their private keys, which are used to access and manage their
digital assets on the blockchain. Private keys are essentially cryptographic keys
that prove ownership and allow you to sign transactions to send or receive
assets. Non-custodial wallets, also known as self-custody wallets, are usually
software applications (like mobile apps, desktop wallets, or web wallets) that
store these private keys locally on the user's device. The user is responsible for
securely storing and managing their private keys. Since the user has full control,
they have the freedom to transact and manage their assets without relying on
third parties.
​ Custodial: In a custodial setup, a third party holds and manages the private keys
on behalf of the user. This third party could be an exchange, a wallet provider, or
a financial institution. When using a custodial service, users often create
accounts on these platforms and deposit their assets into accounts associated
with their profiles. The platform manages the private keys, and users usually
access their accounts using usernames, passwords, and two-factor
authentication. While this approach can offer convenience and ease of use, it
also means that users are relying on the security practices and policies of the
custodial service. If the service is compromised or goes offline, users might
temporarily lose access to their assets.

Key Differences:

​ Control and Ownership: In a non-custodial setup, users have complete control

and ownership of their private keys. In a custodial setup, the control is delegated
to a third party.
​ Security: Non-custodial setups generally provide higher security, as users control
their private keys and reduce the risk of centralized breaches. Custodial setups
might be convenient but can be riskier if the custodian is compromised.
​ Freedom: Non-custodial setups provide users with more freedom to transact and
manage their assets independently. Custodial setups might have restrictions and
require users to comply with the platform's terms.
​ Responsibility: Non-custodial setups require users to take more responsibility for
the security of their private keys. Custodial setups shift this responsibility to the
custodian.
 ​ Recovery: Non-custodial setups can be more challenging to recover in case of
lost keys. Custodial services often offer account recovery options.

The choice between non-custodial and custodial largely depends on an individual's

priorities, risk tolerance, and familiarity with blockchain technology. Some prefer the
security and control of non-custodial setups, while others opt for the convenience of
custodial services.