Self-Custody
Keeping your own private keys, so that no company can move, freeze, or lose your digital assets on your behalf.
In self-custody the user generates keys locally, usually recorded as a recovery phrase of standardized words that can regenerate every key in the wallet. There is no account, no password reset, and no support desk, so the entire burden of backup, device security, and inheritance planning falls on the user. The tradeoff is explicit: counterparty risk from an exchange or custodian is removed and replaced by personal operational risk. Regulators in several jurisdictions refer to these as unhosted or self-hosted wallets, and rules about transfers to and from them differ by country.
In practice
A hardware wallet keeps the private key on a dedicated device and signs transactions there, so the key never appears on an internet-connected computer.
The common misunderstanding
Self-custody removes counterparty risk but adds personal risk; a lost recovery phrase cannot be reset by anyone, and assets behind it become permanently unreachable.