📝 Definition:
Custody in crypto refers to who holds and controls your cryptocurrencies.
It’s like deciding whether to keep your money in a bank or under your mattress.
🔑 Key Features:
- Hot Custody: Your crypto is kept online for easy access.
- Cold Custody: Your crypto is kept offline for better security.
- Third-Party Custody: A service holds and manages your crypto for you.
⚙️ How It Works:
- Personal Custody: You store your crypto in your own wallet, having full control and responsibility.
- Institutional Custody: Banks or specialized companies hold your crypto, which can be safer but means you have to trust them. It can also mean it takes more time to access your crypto when you need it.
💡 Applications:
- Personal Use: Individuals keeping their crypto in personal wallets for day-to-day use.
- Institutional Use: Companies and investors using third-party services to manage large amounts of crypto safely.
🔍 Example:
Imagine you have a precious gold necklace.
You can either keep it in a safe at home (that's personal custody) where you control it directly.
Or you can keep it in a bank vault (that's institutional custody) where it’s well-protected but it's not as easily accessible.
Just like the necklace, how you store your crypto can affect both its security and how easily you can use it.