Custody is the safekeeping of assets on behalf of another party. In cryptocurrency, custody refers to services that allow for the secure storage and management of digital assets such as Bitcoin or Ethereum. These services are offered by third-party custodians who specialize in providing financial security for their clients’ crypto holdings.
These custodial solutions offer a variety of features designed to protect customers’ funds from theft, loss, and other risks associated with digital asset ownership. They also provide users with an extra layer of assurance regarding their investments since these custodians must follow certain regulations imposed by both government agencies and industry standards organizations.
Cryptocurrency exchanges often require users to store their coins on the exchange itself if they wish to use its trading platform; however, this can be risky due to potential hacks or system failures which may cause them to lose all their funds in one fell swoop. By contrast, keeping your cryptocurrencies stored in a separate wallet (off-exchange) provides enhanced security since it ensures that even if something were to happen at the exchange level you would still have access over your own private keys should you need them down the road – something only possible when using non-custodial wallets like hardware wallets (i.e., Trezor). The downside is that off-exchange wallets typically come with more responsibility because there isn’t always someone else looking after them 24/7 but rather it’s up to yourself or a designated person within your organization responsible for maintaining control over these private keys going forward – hence why many people opt for third-party custody solutions instead given how robust they usually are compared against regular “hot” wallets found online today.
In short: Custody offers investors peace of mind by allowing them not just store but actively managetheir cryptocurrencies while being subjectto various regulatory requirements imposedon custodian firms across different jurisdictions globally – makingthem attractive choicesfor institutionalinvestorswho want added layersof safety beyond whatregular hotwallets provide alone .
