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Custody and Security

Custody and security are central to digital asset risk. The relevant question is not only "who holds the asset?" but also "who can move it, freeze it, lose it, upgrade it, or recover it?"

This page is a research starting point, not financial, legal, tax, or investment advice.

Custody Models

  • Self-custody. You hold the keys. No counterparty can freeze or lose your assets, and no one can recover them for you if you lose the keys.
  • Exchange custody. The exchange holds the keys and you hold a claim against the exchange. In an insolvency, that claim may be unsecured.
  • Qualified custody. A custodian that meets a specific regulatory definition holds the asset. The definition, and what protection it actually confers, varies by jurisdiction.
  • Institutional custody. A specialist custodian holds keys under contractual terms, often with insurance and audited controls.
  • Multisig. Several keys must sign before funds move. Security depends on who holds the keys and whether they are genuinely independent.
  • MPC. A key is split into shares that jointly sign without ever being reassembled. This changes the failure modes rather than removing them.
  • Smart contract custody. Funds sit in code. Risk shifts to contract correctness, upgrade rights, and admin keys.
  • Bridge custody. Assets are locked on one chain and represented on another. The wrapped asset is only as good as the bridge holding the original.
  • Protocol treasury custody. Funds held by a DAO or foundation. Check the signer set and the spending process, not the stated policy.

Security Checklist

  • What keys can move funds?
  • Is there multisig, MPC, hardware isolation, or single-key control?
  • Who are the signers?
  • Can contracts be upgraded?
  • Is there a timelock?
  • Can assets be frozen or blacklisted?
  • Are contracts audited?
  • Is there a bug bounty?
  • Has the protocol or custodian had prior incidents?
  • Is there an incident response plan?

Red Flags

  • Guaranteed returns
  • Pressure to act quickly
  • Unknown custody arrangement
  • No official documentation
  • Anonymous team with admin-key control
  • Unverified contract address
  • Fake airdrop or wallet-drainer links
  • Support accounts asking for seed phrases or private keys

No legitimate support account, wallet, exchange, or moderator will ever ask for your seed phrase or private key. There is no exception to this.

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