Self custody in blockchain refers to individuals having full control over their digital assets by managing their private keys, without relying on third-party intermediaries.
Understanding Self Custody
Imagine holding the keys to a vault—your vault—where all your digital treasures are safe. That’s self custody. You don’t rely on banks or any third-party services to keep your digital assets secure. Instead, you take charge. In the realm of cryptocurrencies and NFTs, this concept is a cornerstone of the decentralized web3 environment.
What is Self Custody in Crypto?
Decentralization is the heartbeat of web3. It empowers you to own your assets without intermediaries. You choose: be your own bank with a non-custodial wallet or use a custodial service with a hint of centralization. With self custody, as long as your private keys are safe, your assets are too—much like gold in a personal vault.
Asset Custody and Trust
Traditionally, we’ve trusted banks and governments with our assets. But in web3, using a centralized exchange means handing over your private keys. Self custody shifts the paradigm. You become the bank and the security, eliminating the need for external trust.
What is a Self-Custody Wallet?
A self-custody wallet is your decentralized tool for holding cryptocurrencies. It secures your private keys, which are essential for accessing your blockchain assets. Remember, your assets live on the blockchain—your wallet simply holds the keys to access them.
Self custody wallets come in two flavors: ‘hot’ and ‘cold.’ Hot wallets are digital, internet-connected applications, while cold wallets are physical devices that keep your keys offline. Each type offers a different balance of convenience and security.
- Hot Wallets: These are accessible through mobile and PC, always connected, offering convenience and quick transactions.
- Cold Wallets: These are physical devices, like the Ledger nano wallet, keeping your keys offline and away from online threats.