Glossary
What is self-custody?
In one sentence
Self-custody means holding your own private keys, so no company can freeze, lend out or lose your crypto — and no one can recover it for you either.
Self-custody is the arrangement where you, and only you, control the keys to your crypto. The opposite is custodial holding, where an exchange or app holds the keys and shows you a balance.
The case for self-custody is that it removes counterparty risk. A custodian can freeze your account, be hacked, restrict withdrawals, lend your assets out, or fail entirely. Several large platforms have done exactly this, and customers discovered their “balance” was an unsecured claim on a bankrupt company.
The case against is that it moves all the risk onto you. There is no password reset and no fraud department. Lost seed phrase, no coins. Signed a malicious transaction, no reversal. A meaningful amount of self-custodied crypto is lost to simple human error rather than theft.
For most people the sensible answer is neither extreme. Small amounts you are actively trading can reasonably sit on a reputable exchange; amounts you would be upset to lose belong in self-custody with a properly backed-up seed phrase. The right split depends on how much you hold and how confident you are with the process.
For example
"Not your keys, not your coins" is the shorthand — it means a balance on an exchange is a promise, not possession.