Self-Custody vs Third-Party Custody

The debate between self-custody and third-party custody is fundamental to Bitcoin. "Not your keys, not your coins" is a core Bitcoin principle — but is it always the right choice?

Self-Custody: Maximum Sovereignty

Self-custody means you control your own private keys. Nobody can freeze your assets, deny withdrawals, or lose your Bitcoin through mismanagement. You are fully sovereign.

The tradeoff is responsibility. If you lose your keys or seed phrase, your Bitcoin is gone forever. There is no customer support to call. No recovery process. This responsibility is significant.

Third-Party Custody: Professional Security

Third-party custodians — whether exchanges, qualified custodians, or multi-institution providers — manage your keys professionally. They offer insurance, regulatory compliance, and recovery processes.

The tradeoff is trust. You must trust the custodian to remain solvent, honest, and secure.

The Middle Ground: Collaborative Custody

Collaborative custody bridges both worlds. In a 2-of-3 multisig setup, you hold 2 keys and the provider holds 1. You can always move funds independently, but the provider can assist with recovery.

How to Decide

Consider your technical expertise, the amount of Bitcoin you hold, your need for regulatory compliance, and your risk tolerance. There is no universally correct answer.