A custodian refers to an entity or service that holds and manages assets on behalf of others. These entities may offer services like secure storage of private keys, managing access to funds, or providing insurance against potential risks. However, in the context of DeFi, the concept of custodianship is often challenged or redefined due to the decentralized nature of the ecosystem.

Traditionally, custodians have been centralized institutions like banks or financial intermediaries responsible for safeguarding and controlling assets. They act as trusted third parties and provide custody services to securely hold and manage assets on behalf of their clients.

In DeFi, the aim is to eliminate the need for centralized custodians and enable users to have direct control over their assets. DeFi protocols utilize smart contracts and blockchain technology to automate various financial functions and allow users to interact with the protocol directly, removing the need for intermediaries.