Self-Custody Risk

Self-custody risk describes the dangers inherent in taking full responsibility for one's own financial assets without a third-party intermediary. Unlike traditional banking, where institutions provide insurance and recovery services, self-custody places the entire burden of security on the user.

If the user loses their private keys or seed backup, the assets are permanently unrecoverable, as there is no central authority to reset credentials. Additionally, users are vulnerable to sophisticated social engineering, physical theft, and errors in smart contract interactions.

While self-custody offers total sovereignty and censorship resistance, it requires a high level of technical literacy and discipline. It is a fundamental trade-off between the freedom of total control and the risk of absolute loss.