Selfcustody

Self-custody refers to the practice of individuals controlling the private keys and thus the ownership of their digital assets, rather than entrusting them to a third-party custodian. In cryptocurrency, possession of the private key enables control over the corresponding funds, and transfers require signing with that key. Self-custody emphasizes personal responsibility for security, access, and recovery.

Common methods include hardware wallets, software wallets, and paper backups. Hardware wallets store keys offline on dedicated devices, providing protection from online threats. Software wallets run on computers or mobile devices and are more convenient but depend on device security. Paper wallets and seed phrases provide offline backups but must be protected from loss or damage. Many users employ hierarchical deterministic wallets and, for higher security, multi-signature arrangements that require more than one key to authorize a transaction.

Benefits include control over funds, reduced exposure to exchange failures, and censorship resistance. Drawbacks are the risk of irrevocable loss if keys are lost or stolen, exposure to malware or phishing, and the lack of consumer protections available with custodial services. Self-custody also transfers the burden of backups, recovery, and device security to the user.

Best practices: create and securely back up seed phrases, use hardware wallets for substantial holdings, enable passphrases and two-factor recovery, keep firmware updated, verify addresses on-device, avoid exposing keys to connected computers, and consider multi-signature setups for added redundancy.