Custodial and self-custody wallets
Who holds the keys: a service, or you. The difference between a platform balance and your own wallet.
"Not your keys, not your coins" is a common saying in crypto. It describes the main difference between two kinds of wallets.
Custodial wallets
With a custodial wallet, a service holds the private keys for you. Your balance is a record in the service's system — like a balance in an online account. Exchanges and many platforms work this way.
- Pros: easy to use, password recovery is possible, support can help.
- Cons: you depend on the service's security, availability and rules.
Your USDT balance on XFasil is a custodial balance: you deposit to an address given by XFasil, and withdrawals are processed by XFasil.
Self-custody wallets
With a self-custody (non-custodial) wallet, only you hold the keys — usually as a seed phrase of 12 or 24 words. Mobile and browser wallets and hardware wallets work this way.
- Pros: full control; nobody can freeze or move your funds.
- Cons: if you lose the seed phrase, nobody can restore access. If someone else gets it, they can take everything.
Hot and cold
A hot wallet is connected to the internet (apps, browser extensions). A cold wallet keeps keys offline (hardware wallets, paper backups). Cold storage is safer for long-term savings; hot wallets are convenient for everyday use.
Which to choose?
Many people use both: a service for convenience and a self-custody wallet for funds they want to control directly. Whatever you choose, protect your passwords, seed phrases and email account.
University materials are for education only and are not investment, legal or tax advice.