Digital asset custody refers to the safekeeping of a platform user’s digital assets. To ensure the security of an owner’s assets, digital asset custodians implement safe key management solutions. This means that they implement security measures that maintain the confidentiality of a client’s private keys and ensure that it cannot be accessed by unauthorized parties.
Public key cryptography, the model that custodians implement, is the primary feature that functions as the backbone of private key safekeeping. This allows the creation of security keys that provide authorization for every user transaction.
We see the usual method of digital asset custody from users that keep their holdings in an online exchange’s wallet. This is simple and accessible. However, there are other options such as self-custody (hardware or software wallets) and third-party custody solutions (service providers with the specific objective of storing crypto on behalf of customers).