A non-custodial exchange is a trading platform that allows users to transact digital assets directly from their own wallets, without the exchange ever taking possession of their private keys. This design prioritizes user sovereignty and reduces counterparty risk, as users maintain full control over their funds throughout the trading process. It stands in contrast to centralized exchanges that hold user assets.
Context
Non-custodial exchanges, often decentralized exchanges or DEXs, are a focal point in discussions about financial autonomy and security within the digital asset space. While they eliminate the risk of exchange hacks, they introduce other challenges, such as user error in managing private keys and potential for less efficient trading experiences. Regulatory bodies are examining how to apply compliance standards to these permissionless platforms.
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