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What are custodial and non-custodial wallets? Picture a fancy bank where you deposit your money, and they take care of everything for you. Custodial wallets work in a similar way. They're provided by third-party folks like exchanges or online platforms, who handle your crypto keys and manage your assets. Basically, you trust them to guard your funds. Now, non-custodial wallets are where the real action happens. They give you the power to be the boss of your digital assets. These wallets enable you to have exclusive ownership of your private keys, which are the cryptographic codes that grant access to your funds. Non-custodial wallets can be software or hardware-based, and they let you store and manage your digital goodies independently without relying on anyone else.

How does DeFi work? The real magic behind DeFi is these things called smart contracts. They're self-executing agreements coded on the blockchain and facilitate business all on their own. When certain conditions are met, these contracts kick into gear and make things happen without any intermediaries getting in the way. That means saying goodbye to all the unnecessary costs and inefficiencies. Let us paint you a picture: imagine you wanna borrow some cash through a lending protocol. You put up some digital assets as collateral, and boom! They get locked up in a smart contract. Then, that contract automatically releases the loan amount in a specific cryptocurrency. You've got a timeframe to repay it, with a little extra interest, of course. The entire process is transparent, secure and does not require a traditional financial institution's involvement.