Definition ∞ Non-custodial rewards are incentives earned by users who maintain full control of their digital assets. These rewards are typically generated through staking, providing liquidity, or participating in decentralized finance activities without transferring asset ownership to a third-party custodian. The user’s private keys remain solely with them, minimizing counterparty risk and enhancing security. This approach aligns with the core principles of decentralization and self-sovereignty inherent in blockchain technology.
Context ∞ The popularity of non-custodial rewards is growing as users prioritize security and control over their digital assets, reducing reliance on centralized intermediaries. Discussions often highlight the technical complexities and user responsibility associated with managing private keys and interacting directly with smart contracts. Regulatory bodies are examining the tax implications and legal status of these rewards, particularly in relation to staking services. The continued development of user-friendly interfaces will be key to broader participation in non-custodial earning opportunities.
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