Custodian vs Non-custodial NFTs: Key Differences

By January 23, 2022NFT
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Non-fungible tokens can be minted, sold or bought on NFT trading platforms that are either custodian or non-custodial

Today, the crypto space is filled with NFT platforms of all kinds such as mass and niche ones, self-service or invite-only platforms, gaming NFT platforms, marketplaces sports or music NFT and many more. All of them work slightly differently, offer distinct features, and offer different types of NFTs. The majority of NFT marketplaces are based on the Ethereum blockchain while others belong to blockchains like Binance Smart Chain (BSC), Polkadot, Solana, and Cosmos, to name a few.

Some markets are custodians and others are non-custodial. It should be noted that certain types of NFTs may not be accepted on some platforms, primarily custody ones, as they can choose what goes in and what doesn’t. These platforms are curated and NFT content may be censored. At the same time, noncustodial markets are more open to a variety of NFT types, from art NFTs and virtual collectibles to music and fashion NFTs — it all comes down to the abilities of the uses’ imagination.

Custodian marketplaces act as a third party, as well as an escrow, for a sale by acting as a professional fiduciary for users’ conditional financial transactions. Using these marketplaces, users deposit their funds into the custody of the platform before the digital assets are traded. This is the case of the Binance NFT marketplace and the Nifty Gateway platforms. On these platforms, interaction with other users is mediated by the marketplace, which acts as an intermediary.

Non-custodial marketplaces create a private connection directly between users, creators or sellers, and preserve user autonomy and anonymity, as there is no need for KYC verifications. Platforms like OpenSea and SuperRare allow users to have access to others, all connected in a decentralized network to trade NFTs without an intermediary.

Other differences between NFT marketplaces are based on various factors like whether they support a set file format, whether it’s a joint photo expert group, an exchange format graphics, some audio or video format. Other factors include the accessibility of the platform (self-service or invite-only) and the price to TBEN an NFT, because to TBEN an NFT, users usually have to pay to create a smart contract through the fees of gas.

Knowing the main variabilities between custodian and non-custodial NFTs aims to help users choose how they want to secure and manage their NFT wallets.

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