What is the difference between Custodial and Non-Custodial Bitcoin trades?

On LocalCoinSwap, choose between different wallets and trade types for Bitcoin. Each has its pros and cons.

Custodial trades:

• Faster and cheaper.
• You are trusting the platform with your funds.
• Less control over withdrawal cost and speed.

You utilize the platform’s custodial systems and wallet in a custodial trade. Custodial deposits are pooled together with other users’ funds and held in the platform's secure cold wallets (much like a traditional centralized exchange). As a result, users can trade with each other without the need to pay blockchain transaction fees or wait for the Bitcoin blockchain to process new blocks. Custodial funds are then withdrawn from a centralized wallet.

When withdrawing from your custodial BTC wallet, there is a withdrawal fee to cover the internal transaction costs between deposit addresses, cold wallets, hot wallets, and withdrawals to users’ external wallets. This fee changes from time to time depending on network congestion and other related factors. You can find the current fee outlined here: https://localcoinswap.com/fees/

Non-Custodial trades:

• Trustless - you have control over your own funds.
• Need to pay a blockchain transaction fee to trade.
• More control over withdrawal cost and speed.

Non-custodial trades are completed on-chain and between users' self-custodial wallets. Therefore, it is impossible for the platform or any other third party to seize, steal, or lock your funds at any time without access to your private key or account mnemonic, which only you should have access to personally as it is only generated in your browser and on your device. The seller will broadcast a transaction to send the BTC being traded to an escrow address. Once the payment is received, they share a secret allowing only the buyer to spend the funds in the escrow address.

Only the user has control of their private keys, which can be exported and used in other compatible bitcoin wallet apps to access funds at any time (for example, if the LocalCoinSwap platform becomes inaccessible at any time).

Users who want to withdraw from their non-custodial wallet can choose their withdrawal fee to prioritize between transaction cost and speed. However, it's important to note that this doesn't affect block times. The average block time on Bitcoin is every ten minutes, but it can be significantly less or more than this at times.

Please note:

When selling, your BTC must be in the same wallet type as the trade type you are engaging in. Non-Custodial trades must be initiated from your Non-Custodial wallet and vice-versa. You may send BTC between your different wallets; however, this incurs a small blockchain transaction fee as this requires an on-chain transaction.