Understanding Self-Custody

Self-custody is the practice of maintaining complete control over your digital assets without relying on third parties. In the context of blockchain technology, it means you alone hold the private keys to your cryptocurrencies and other blockchain-based assets.

Key Principles of Self-Custody

• Full Control: You maintain exclusive access to your assets, without third-party permission
• Security Responsibility: You implement and manage your own security measures
• Redundancy: Creating secure backups to prevent single points of failure
• Privacy: Maintaining confidentiality of your holdings and transactions

In self-custody solutions, users bear sole accountability for managing their private keys, risking permanent loss of assets if keys are lost or forgotten. The absence of traditional customer support means users must rely on community resources and self-education to resolve issues.

Implementation Approaches

Various methods exist for implementing self-custody, ranging from hardware wallets to multi-signature setups:

• Cold Storage: Private keys stored on hardware wallets, air-gapped computers, or physical media disconnected from the internet
• Hot Wallets: Internet-connected applications with appropriate security measures for convenience with smaller holdings
• Multi-Signature: Requiring multiple approvals for added security, with keys distributed across different devices or locations
• Social Recovery: Designating trusted individuals who collectively can help recover access if needed

Technical Considerations

• Cryptographic Security: Understanding the fundamentals of public-key cryptography
• Key Management: Best practices for generating, storing, and securing private keys
• Verification: Independently verifying transactions and balances using your own infrastructure
• Recovery Planning: Creating robust procedures for seed phrase backup and recovery