Non-custodial finance refers to financial services and applications where users retain direct control over their digital assets, typically through self-managed private keys. Unlike custodial services, no third party holds or controls the user’s funds. This model aligns with the decentralized ethos of blockchain technology, prioritizing user autonomy and minimizing counterparty risk. Decentralized exchanges are an example.
Context
News often highlights the growth of non-custodial finance, particularly in the decentralized finance (DeFi) sector, where users interact directly with smart contracts. The emphasis on individual sovereignty and censorship resistance drives innovation in this area. However, the absence of intermediaries also places a greater responsibility on users for security, leading to discussions about usability and risk management.
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