Self-custody wallet or exchange: who holds the keys?
People who buy crypto sooner or later ask the same question: leave it on the exchange where it was bought, or move it to a wallet of their own? The two differ in one thing, who holds the keys, and almost everything else follows from that. This post sets out the difference without taking a side.
What a key is
Crypto is not stored inside an app. It is recorded on a public ledger, and a key is what allows a transfer to be signed. Whoever holds the key can move the crypto. Whoever does not hold it has to ask the one who does.
On an exchange, the company holds the keys
When you keep crypto on an exchange, or in any app that holds it for you, the company holds the keys and you hold a login. Your balance is a record in the company's systems.
This has real advantages. If you forget your password, the company can let you back in after checking who you are. There is nothing to back up.
It also means that you depend on the company. If your account is reviewed, everything in it can be paused at once. If the company stops, you wait for it to hand your assets back, and how long that takes is not up to you.
In a self-custody wallet, you hold the keys
A self-custody wallet, also called a non-custodial wallet, turns this round. The key is yours, so only you can sign a transfer. The company that makes the wallet app cannot move what is in it. If that company stops, you can still reach your crypto with your key in another compatible wallet.
The saying "not your keys, not your coins" is a blunt summary of this.
The price is responsibility. Nobody can reset a key the way a password is reset. If you lose the device and the recovery method together, the crypto is out of reach for good. A transfer that you signed cannot be called back.
What stays the same either way
- Price risk. A wallet does not make an asset worth more or less. Its value can fall wherever you keep it.
- Checks. Wherever crypto meets euro, at an exchange, a card or a euro account, the company that provides the service checks who you are and screens transfers. Self-custody does not remove that.
- Fraud. A key that you hand to someone else, or a transfer that you were talked into, is lost in both cases.
A key in two parts
Some wallets split the key, so that no single device and no single company holds all of it. The wallet we are building at Zeltis is planned this way: the key is split in two parts and one of them stays on your phone; both parts are needed to sign a transfer. You will be able to export the key and use another wallet. More is on the pages about the self-custody wallet and on how keys and data are protected.
Three questions that help you choose
- Would you rather rely on a company to keep the key, or on yourself to keep a recovery method safe?
- What would you do if the service were paused for some days?
- How much of what you hold do you move often, and how much do you simply keep?
Many people use both: an exchange for buying and selling, and a wallet of their own for what they keep. Neither choice is right for everyone.
Where Zeltis stands
Zeltis has not opened. Services are not available yet. Two things work today: the waitlist and the demo app, in which every number is simulated.
Risk notice
Crypto-assets are volatile. You can lose money. The value of a crypto-asset can fall as well as rise, and it can fall to nothing. This post is not an offer and not investment advice.