Self-custody vs Custody

With self-custody, you have sole control of your private keys, where you manage and hold the crypto, whereas in custody, another party controls your private keys. Let’s dig deeper into it.

When you first purchase any crypto asset, it is stored in a crypto wallet that can be operated by you (self-custody) or a third party (custody), which has access to it. 

There have been various arguments on whether you should hold and manage your crypto independently or use third-party service. Let’s understand the differences between the two approaches. 

What is self-custody?

Self-custody means that you fully own your crypto assets since you control the private keys. 

Without a private key, you cannot access your crypto assets. You have the responsibility to safeguard the private key, or the 12 word seed phrase (a human readable interpretation of your private keys) as they are not stored anywhere else. You don’t usually need technical knowledge to use a self-custody wallet.

It is just like putting cash under your pillow, but more secure, private and empowering to the individual.

What is custody?

It is a third-party solution provider entrusted by a client to manage, hold and trade crypto assets.

The user gives access to their crypto assets to the third-party for managing their funds. Custody is just like a bank account, where you have an email login interface with a third-party custodian that essentially holds your crypto assets for you. 

Are self-custody secure?

Self-custody cryptocurrency wallets are very secure, and depend on how safe you keep your private key or seed phrase. 

Never lose or share your private key with anyone. Keep your phone locked at all times if you are using a mobile wallet. 

Is custody secure?

Security level of custody is quite low as an industry standard, as all the sensitive user data is stored in hot and cold storage, which historically are often hacked by data intruders. However, if you lose your private key, it is easy to regain access to your wallet and your stored funds.

Who uses self-custody?

Any user who wants complete control of their crypto assets uses self-custody. 

Self-custody is just like keeping cash in your physical wallet or locked in a drawer, which poses its own risks. By using this, the users need not depend on any third party to manage their assets or perform any related activity. 

However, if a user dies and if the private key is not shared, the digital assets cannot be redeemed by any family members and are lost forever. 

And who uses custody?

Investors and institutions, such as asset managers, hedge funds, and/or high-net-worth individuals often use third-party solutions for digital asset security. 

Custody also allows investors’ legal heirs to redeem the digital asset wealth if the owner passes away. Clients sometimes even use multiple third parties if they want two or more providers involved to verify instructions and move funds.  

So, which one to choose? 

Whether you choose self-custody or custody, what is crucial is that you select a reputable wallet. Klever App is a secure & decentralized peer-2-peer (P2P) crypto wallet used by over 3 million users worldwide. 

The unique feature of this wallet is that your private key is encrypted and stored in your smartphone and even the Klever team cannot access your private key.

Klever offers true and secure ownership of cryptocurrency 

The security of Klever App is ensured by being built on top of Klever OS (Operating System), which uses advanced security mechanisms that completely protect the users’ private keys and funds.

What you should have in mind is that selecting between self-custody and custody is a key decision when it comes to securing your crypto assets. You have to decide whether you want to hold your crypto at one place or spread it to various wallets. 

Klever Exchange on the other hand offers our global user base a custody solution they can trust since the security architecture of Klever Exchange uses an innovative and proprietary security software architecture. 

Klever has been perfecting the security of its Klever Kustody solution for years through their work in the crypto wallet field and banking sector, making the exchange wallet system extremely secure, based on the latest encryption methodologies available.

Since all components of the Klever Exchange security architecture can communicate with one another, but not give commands to or affect the other components’ actions, this makes the entire system virtually bulletproof against malicious actors or hackers, and introduces a new era of wallet security for the crypto exchange industry.

Whatever be your choice, be sure to always select the best security practices.

Choose the Klever way, 

Jagdish Kumar

Please rate our article


Your page rank:

You might also like

Tron (TRX)
Coin of the Week

Coin of the Week: Tron (TRX)

Tron is a blockchain-based operating system designed to make this technology suitable for everyday use.

Klever WalletEverything you need in a crypto wallet

Klever Wallet, allows you to send, receive, swap, access Dapps, and stake directly and securely. Available on Andriod & iOS