Crypto-custody is a term used to describe the secure storage of cryptocurrency, such as Bitcoin and Ethereum. It refers to services that provide custodial solutions for digital assets, allowing users to store their funds securely without having direct access or control over them. Crypto-custodians are responsible for managing private keys on behalf of customers in order to ensure safekeeping and prevent unauthorized transactions from taking place.
Cryptocurrency custody providers can be divided into two primary categories: cold storage wallets (offline) and hot wallet service providers (online). Cold storage wallets are generally considered more secure because they utilize offline hardware devices which cannot be hacked online due to the lack of an internet connection; however, it requires additional steps in order for clients to legally gain access. Hot wallet services provide near instant accessibility with minimal effort but require trust between the user and provider since there is no physical device required – meaning hackers have greater potential opportunities if security protocols aren’t upkept properly by either party involved.
In addition, crypto-exchanges may also offer some form of custodial solution depending on their platform model; exchanges like Coinbase allow users deposit/withdrawal options through insured third parties such as Fidelity Digital Assets Services LLC who act as custodian over deposited coins until withdrawn from accounts again..
Custodial solutions can serve many purposes beyond simply protecting cryptocurrencies themselves; companies offering these types of services often focus on providing institutional investors with enhanced levels of protection when trading digital assets while meeting regulatory requirements put forth by governing bodies within different countries around the world. Additionally certain platforms feature insurance coverage against potential losses related theft or other malicious activities performed against stored cryptocurrencies – making this type of service particularly attractive amongst high net worth individuals entering markets traditionally dominated by large financial institutions/institutional investors only recently been opened up thanks advances technology & blockchain networks
