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Custodial wallet
A custodial wallet is an account where a company, such as an exchange, holds the private keys and moves crypto on your instructions. You see a balance and log in with a password, but on the blockchain the coins sit in addresses the company controls.
What it means for you. Your access depends on the company: it can be hacked, fail, or freeze withdrawals, and its terms decide what happens to your balance. Check whether you can withdraw to an address you control, what it costs, and how long it takes before you depend on it.
Sources: bitcoin.org: Secure your wallet, SEC Office of Investor Education: Crypto asset custody basics for retail investors · checked 4 October 2026
Self-custody
Self-custody means holding the private keys to your crypto yourself, in a wallet you control, instead of leaving them with a company. Nobody else can freeze, move or lend your coins, and nobody else can restore them if the keys are lost.
What it means for you. You carry the whole job of backup: if the seed phrase is lost or stolen, there is no password reset and no one to call. Anyone offering to recover a self-custody wallet for a fee is very likely a scam. Test restoring from your backup before relying on it.
Sources: ethereum.org: Ethereum wallets, bitcoin.org: Secure your wallet, SEC Office of Investor Education: Crypto asset custody basics for retail investors, BIP-39: Mnemonic code for generating deterministic keys · checked 4 October 2026