What is cryptocurrency custody and how does it work?

When it comes to economics, the terms used in this area don’t make life easier for users, do they? Income, refund, depository institution, operator, cryptocurrency custody… It doesn’t even seem like we were taught to read and write, what kind of Portuguese is that!

So, we are going to simplify one of these concepts in this article so that you can manage your finances in the most advantageous way possible. Today we are going to talk about cryptocurrency custody.

Despite the ups and downs (and falls), it seems that cryptocurrencies are here to stay. So, knowing the language of the processes involving this digital currency is essential to ensure that we don’t slip up and lose money – after all, every penny counts.

But, to understand custody, let’s take a little trip back in time, to when things were simpler.

What is self-custody of money?

In our grandmother’s time, there was paper money. Let’s consider the cruzado as an example of paper money, but it could be the real, too.

Returning to our grandmother’s example. Since access to banks was not so common, or even impossible for those who lived in the countryside, it was common to keep money under the mattress. Have you heard of this?

Well, in financial terms, your grandmother had self-custody of her own money. In other words, she was responsible (custodian agent) for keeping and moving her own money in the mattress (deposit institution) according to her interests and needs (operator).

But things are not so simple anymore. Let’s now think about what this process would be like with cryptocurrencies.

What is cryptocurrency custody?

Just to reinforce the idea, according to the dictionary online Priberam, custody means “a place where someone or something is kept safely”.

Now, when bringing this term to the financial world, it means “a place where assets and securities are safely stored, protected from any type of fraud or theft.”

In the case of cryptocurrencies, this custody can be carried out by both companies and individuals. It has been very common for investors to rely on cryptocurrency wallets that can operate in a secure manner. online It is offline (disconnected from the internet), which guarantees much greater security against hackersfor example.

So, cryptocurrency custody is nothing more than the place or individual responsible for keeping these financial assets (cryptocurrencies) safe so that they are not stolen or defrauded.

How does it work?

If you’ve made it this far, now is the time to understand how the cryptocurrency custody process works in practice. First, there need to be two people involved in the process: one person who wants to buy cryptocurrencies and another who wants to sell them.

These two people negotiate through a Exchange – platform where the purchase and sale of shares is made. When the transaction is carried out and accepted by both parties, the seller and the buyer authorize the agreement and the cryptocurrency is transferred from one person (or party) to another.

In this dynamic, cryptocurrencies are under the custody of the Exchange platform, as these assets will be in its system.

You in the power of your resources

One option for the user to have custody of their cryptocurrencies is to transfer the assets to their Walletor simply, virtual wallet. This action is becoming very common and is known as cryptocurrency self-custody.

Very similar to when your grandmother kept her money somewhere, but this time, with the support of technology, the user does not run the same risks that people ran in the past, such as floods and fires.

This gives the user more autonomy over their assets, as if they were saving money in the traditional way again. They can move, withdraw and use the funds as they wish, without having to contact a platform to do so.

However, security is the user’s responsibility. Therefore, some actions need to be taken, for example, controlling your own private keys.

This way, you protect your assets against virtual theft. But you will still have control over your cryptocurrency without relying on intermediaries.

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