Define “Custodial” versus “Non-Custodial” in Crypto

A custodial service means a third party (like a centralized exchange) holds and manages the user's private keys and, thus, their funds. Non-custodial means the user retains full control of their private keys and assets, typically through a personal wallet or a decentralized protocol.

Non-custodial is generally preferred for security but places the burden of key management on the user.