The key question in wallet custody is who can authorize transactions. With self-custody, the user controls the private keys. With a custodial service, the provider controls keys and maintains the user’s account.
Custodial accounts
A custodial exchange or service can offer password recovery, customer support, and account controls. In return, the user depends on that provider to safeguard assets, process withdrawals, remain solvent, and follow its terms.
The balance shown by a custodian is an account claim until assets are withdrawn on-chain. Availability can also be affected by maintenance, security reviews, or local rules.
Control and recovery move together
Custodial services can reset account access but control the keys. Self-custody removes that provider dependency while making the user responsible for backups and transaction decisions.
Self-custody
A self-custody wallet lets the user sign transactions directly. Wallet software is an interface to an account; the assets remain recorded on the blockchain.
Recovery normally depends on a seed phrase or another backup method. Losing every valid backup can make funds inaccessible, while anyone who obtains the recovery secret may be able to take them.
Many people use both models
An exchange account may be convenient for trading while a self-custody wallet is used for direct blockchain access. Transfers between them require the same network checks as other withdrawals.
Sources
Educational information, not investment advice.