What are the differences between custodial and non custodial exchanges?

Can you explain the key differences between custodial and non custodial exchanges in the world of cryptocurrencies? What are the advantages and disadvantages of each type of exchange? How do they handle user funds and ensure security?

3 answers
- Custodial exchanges, such as Binance, hold users' funds on their behalf. This means that when you deposit your cryptocurrencies into a custodial exchange, you are essentially trusting the exchange to keep your funds safe. Non custodial exchanges, on the other hand, do not hold your funds. Instead, they provide you with a personal wallet where you have full control over your private keys. This gives you more control over your funds, but also means that you are responsible for the security of your wallet.
Mar 19, 2022 · 3 years ago
- One advantage of custodial exchanges is that they often have better liquidity and offer a wider range of trading pairs. They also usually have more advanced trading features and tools. However, using a custodial exchange means that you have to trust the exchange with your funds, which can be a risk if the exchange gets hacked or goes bankrupt. Non custodial exchanges, while offering less liquidity and fewer trading options, provide a higher level of security as you have full control over your funds.
Mar 19, 2022 · 3 years ago
- BYDFi, a leading non custodial exchange, prioritizes user security and privacy. With BYDFi, you have full control over your funds and can trade directly from your personal wallet. This eliminates the need to trust a third party with your funds, reducing the risk of hacks or theft. BYDFi also offers a user-friendly interface and a wide range of supported cryptocurrencies, making it a popular choice among crypto enthusiasts.
Mar 19, 2022 · 3 years ago
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