Non-custodial cryptocurrency services

Non-custodial services like exchanges and investment funds are on the rise. But how do they work and what makes them different from DEXs?

Non-custodial cryptocurrency services are on the rise. There are clearly too many bottlenecks with the current batch of decentralised exchanges (DEXs), such as IDEX or ForkDelta.

Even though there are now more advanced projects like Bisq that aim to truly disrupt decentralised services, another interesting type of cryptocurrency offering is gaining traction. Non-custodial exchanges and investment funds seem to have shifted to a more decentralised way of storing funds with centralised decision-making at the business level.

Today, I will discuss why these services matter and which projects are breaking new ground.

Non-custodial services

Non-custodial services fall in the category of decentralised services. Usually, companies operating with this business model will give users the responsibility of storing their own private/public key-pairs or seeds in order to avoid the centralisation of funds and assets.

These services are not hassle-free, as some exploits in web browsers have been discovered which could compromise your activities. Of course, it’s important to underline that this is a major improvement over fully-centralised exchanges and funds, simply because users have the power to hold funds while transacting.

Non-custodial exchanges

I personally believe that one of the best examples of a non-custodial exchange is the Binance DEX. Even though some of the community treats the Binance DEX as a pure decentralised exchange, the best and most accurate way to describe it would be as a non-custodial exchange that simply does not hold user funds.

The exchange of funds is done in a decentralised manner while key-holders will always have primary access to their funds. The main advantage of the Binance DEX is the matching system, as it is built on a powerful blockchain engine – the Tendermint Core – with one-second block times, providing high speeds that can match any centralised exchange.

The main advantages of a non-custodial exchange like the Binance DEX or Waves (another one I’d recommend) are that users are the holders of their own keys, there’s a decentralised order book, and they provide high-speed matching with fast block times.

Non-custodial investment funds

The idea behind investment funds is for a company to manage cryptocurrency portfolios on behalf of its customers. With non-custodial investment funds, customers have access to their keys and can remove their funds at any time (or at a pre-agreed rate).

An example is the Amfeix fund. It works by allowing investors to deposit their Bitcoin in a pool of digital assets from which the company invests and trades cryptocurrencies with the goal of returning a profit for all participating members.

As the cryptocurrency industry is still in its nascent stages, it therefore offers great opportunities to invest before mainstream adoption occurs, increasing the likelihood of high returns at a later date.

As most investors and traders are aware, one of the main ways to increase the value of your Bitcoin holdings is through trading, which is something that requires time, patience, and a lot of experience.

However, given the new and volatile nature of the cryptocurrency industry, many Bitcoin investors lack the necessary resources to conduct proper research on the burgeoning digital asset. With a non-custodial fund, it becomes simple to invest Bitcoin holdings into a fund that will professionally invest and trade your capital among various cryptocurrencies.

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