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.

In a custodial trade, you are utilizing the platform’s custodial systems and wallet. Custodial deposits are pooled together with other users’ funds and held in the platform's secure cold wallets (much like a traditional centralized exchange). 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 Custodial funds are then withdrawn from a centralized wallet.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 in relation to the congestion and is 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. It is impossible for the platform or any other third party to seize, steal, or lock your funds at any time. This includes from non-custodial wallets or during non-custodial trades. The seller will broadcast a transaction to send the BTC being traded to an escrow address. Once the payment is received, they then share a secret that allows only the buyer to spend the funds in the escrow address.

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

When a user wants to withdraw from their non-custodial wallet, they can choose their withdrawal fee to prioritize between transaction cost and speed.

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.