Non-custodial wallets and decentralized finance (DeFi) interfaces help users interact with permissionless networks. They may assist users to format messages, set transaction parameters, and submit instructions that are executed by smart contracts or third-parties.[1] The core functional infrastructure they provide operates across a spectrum of technical design and incentive choices.
In this post, we analyze the functional layers of non-custodial wallets and DeFi interfaces, focusing on signing, routing, and broadcasting as user-initiated actions. A user signs a transaction, the transaction is routed to an on- or off-chain liquidity source and then broadcasted to the network for inclusion in a block.
This post is not legal analysis.
Signing
There are additional standards and mechanisms through which users initiate transactions. This analysis seeks to provide a snapshot of some of the most common methods.
A user may sign either a transaction or a message when initiating an action.[2] Non-custodial wallets such as Externally Owned Accounts (EOA) on Ethereum and Keypair Accounts on Solana allow users to create and control their public and private keys and sign transactions directly. On Ethereum and Solana, only EOA or Keypair Accounts can sign transactions.[3]
Some non-custodial wallets utilize key management that is integrated directly into an interface or application. This enables developers to simplify aspects of account setup and management for users while retaining no custody or control of assets. Public and private keys are either stored in encrypted form, accessed through cryptographic techniques such as Multi-Party Computation (MPC) and Trusted Execution Environments (TEEs), or managed by multi-signature schemes.[4] These forms of key management remain non-custodial as long as unilateral signing without user approval is not possible.
ERC-4337 smart contract wallets on Ethereum enable users to express a desired outcome for a transaction by signing a message with execution parameters – known as a user operation. Private keys, accessed directly or with a key management service, are still used to sign user operations. Signed user operations are packaged into transactions that are signed by the EOA of a Bundler, a service provider that bundles multiple user operations into one transaction. The Bundler does not have custody of any user assets and any modification to a user operation will cause it to fail.
Some DeFi interfaces may request users to sign messages using typed structured data signing standards, such as EIP-712, alongside token approval mechanisms, such as Permit2. These enable users to express desired execution parameters to on- and off-chain routing protocols. Users typically sign a completed transaction once a routing path has been established. Some users may grant approval to smart contracts that enable the transfer of assets on behalf of users without additional signatures. Users have the ability to revoke these permissions at any time and some implementations impose time limitations on such approvals.
Routing
Routing is the process by which wallets or interfaces are utilized to connect users with on- and off-chain liquidity sources.
Wallets and interfaces may display certain information to assist users discovering assets and prices. This information may include asset, asset price, gas, slippage, RPC, router, venue, and suggested quotes. Some of these elements are set by users and others have default settings administered by wallet and interface providers. While many of the parameters may impact the relative speed or price of execution, no variable can alter the contents of the transaction itself or execute the transaction outside of the user defined slippage tolerance. In most cases, wallets and interfaces are not executing transactions on a users account, giving advice or recommendations and instead are connecting users with available quotes and liquidity.
Some wallets and interfaces offer routing systems that communicate with on- and off-chain liquidity sources to provide users with simulated quotes. Alternatively, users can express an intent to trade an asset at a certain price or dependent on certain market conditions. These trade types might expire after a certain amount of time.
On- and off-chain liquidity sources have varying degrees of relationships and connectivity with wallets and interfaces. Some wallets and interfaces might simply derive information from permissionless protocols such as an Automated Market Maker (AMM). Others might aggregate multiple AMMs and display the best quote to users. Furthermore, while some wallets and interfaces connect with private market makers to supplement quotes from AMMs, others deploy proprietary routing software with incentives and permissioned rules for private market makers or solvers. Some wallets and interfaces leverage PropAMMs where a professional market maker manages pricing using off-chain algorithms rather than public bonding curves.[5]
Broadcasting
Broadcasting propagates a transaction to the network by submitting a signed transaction for inclusion in a block to either public or private services.[6] Broadcasting cannot alter a transaction, however transactions could be dropped, delayed, or bundled during the broadcasting process. Broadcasting is typically initiated through an RPC.[7]
Some wallets and interfaces monetize user orderflow through gas and priority fee refunds or auctioning backrun opportunities on user orderflow to searchers. Fee refunds can be applied to user accounts to provide incentives such as gasless trading. How a transaction is signed will impact who controls its broadcast and where the corresponding value of its place in a block flows. Some wallets and interfaces give users customized control and others do not. Monetization of user orderflow and whether the value generated is shared with users or internalized varies between wallets and interfaces.
The selection of RPC by a wallet, interface, or a user can improve execution and/or protect transactions from malicious mempool behavior. The selection will also impact which and how many block builders see their transaction, which may impact inclusion speed and executed price.
Functional Analysis
As DeFi and financial markets continue to converge, regulators are increasingly interested in the regulatory status of DeFi services that may interact with tokenized securities and commodities. Courts have long observed, including recently in SEC v. Coinbase, Inc., broker-dealer status depends on a non-dispositive, multi-factor analysis that may include whether a person:
(1) actively solicits investors; (2) receives transaction-based compensation; (3) handles securities or funds of others in connection with securities transactions; (4) processes documents related to the sale of securities; (5) participates in the order-taking or order-outing process; (6) sells, or previously sold, securities of other issuers; (7) is an employee of the issuer; (8) is involved in negotiations between the issuer and the investor; and/or (9) makes valuations as to the merits of the investment or gives advice.
Understanding the functional layers of wallets and interfaces in the context of these factors and additional court rulings and no-action letters will help regulators parse their facts and circumstances as they consider proposed rules.[8]
DeFi Education Fund, Solana Policy Institute letter to the SEC on Non‑Custodial Wallet Software and Neutral User Interfaces, February 2026 ↩︎
A message can be defined as a data structure, a user operation, or other intents. ↩︎
Transactions can be signed by smart contracts or programs through owned EOA or Keypair Accounts. ↩︎
Private keys are only retrieved when a user signs a transaction and are not disclosed to wallet providers or third-parties. Multi-signature schemes are typically used to manage shared accounts. ↩︎
Solvers are a category of market maker that receives a request for quote and competes to fill the quote across both on- and off-chain liquidity sources. ↩︎
Public mempool, private mempools, or directly to builders or searchers ↩︎
Alchemy, What is an RPC node?, April 2025 ↩︎
SEC, Staff Statement Regarding Broker-Dealer Registration of Certain User Interfaces Utilized to Prepare Transactions in Crypto Asset Securities, April 2026 ↩︎