### Self-custody is the most secure method of storing and managing your digital assets, but it has risks too.

Answer these three questions before you self-custody your digital assets (bitcoin, crypto, NFTs):

####  1. Do I understand how the blockchain actually works?

If you don't understand blockchain technology, do not attempt to self-custody your digital assets. Instead, invest some time learning about how blockchain technology works. 

Consider this: storing digital assets in a wallet does not take the assets out of the blockchain ledger. Storing assets in a wallet means the blockchain  assigns ownership of specific digital assets to the account your wallet represents. You will see the assets in your wallet, but nothing is removed from the blockchain ledger - and nothing transfers out of the chain into your wallet.  If this surprises you, you should definitely avoid self-custody for now.

A self-custody wallet holds one important thing: your private key. Whether it is a hardware self-custody wallet like Ledger, or a software application like Trust or Metamask, it is the exclusive use of a private key known only to you that defines self-custody as self-custody.

What actually happens when an exchange sends your digital assets to your self-custody wallet? The exchange's hot wallet will "send" the digital assets to your self-custody wallet. Behind the scenes, the send transaction involves (1) the exchange initiating a transaction on-chain that instructs the ledger to transfer "x" amount of tokens from the hot wallet to your wallet, (2) the exchange digitally signing the transaction and allocating network fees, and (3) the network processing the transaction through block creation. 

Once the transaction is recorded in a new block, the assets will be officially deemed "moved" from the exchange's account to your self-custody account.  On the blockchain ledger, the only thing that will change is the balance in the exchange's account (x amount subtracted), and the balance in your account (x amount added). Did anything move out of the chain? Not at all. Everything is on-chain, where it should be. What new thing has been stored in your Ledger, Metamask, or Trust application? Nothing. Again, everything happens on-chain. 

What about the tokens you see in your wallet after the above example? Where are they? They are still on the blockchain, but they are now under your exclusive control.

#### 2. Do I have a way to store my private key safely and securely?

Safe private key storage means it is not subject to destruction easily. If you plan to store your key on paper, you should have a vault or safety deposit box where it can be safe against fire, water, and other agents of deterioration. 

Secure private key storage means there is a very low risk that the private key can be copied or stolen by someone else. 

In a paper backup system, safety could mean the use of a vault, and security could mean the use of a scrambling system to ensure the key or the mnemonic phrase is not stored in its true order. Some individuals store only portions of the key in one location. 

In a digital backup system, safety and security are similarly intertwined. A secure, encrypted backup must also be matched with good practices such as two-factor authentication, physical security keys, etc. 

#### 3. Do I believe in the blockchain I am using? 

Self-custody of a digital asset is a vote of confidence in the network. Whether it is bitcoin, ethereum, or polygon, keeping the assets on-chain means you believe the network is worth supporting and that it will succeed. At the same time, self-custody brings the digital assets you own under your exclusive control, an advantage made even more important in the wake of the FTX collapse. 

We wish you all the best on your crypto journey, and fair winds in the coming year! 

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Lear how to self-custody your digital assets [here](https://www.cryptoflash.report/articles/how-to-take-self-custody-of-your-crypto).


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