Custodial vs non-custodial

Custodial means a third party holds your private keys and controls your crypto; non-custodial means you hold the keys yourself. This distinction decides who can actually move your funds if something goes wrong, whether that's a hack, a frozen account, or a company going bankrupt. When Celsius collapsed in 2022, users with funds on the custodial platform got stuck in bankruptcy court for over a year, while anyone holding coins in a non-custodial wallet like a Ledger kept full access the entire time. Custodial setups, like leaving coins on Coinbase, are convenient and offer password resets. Non-custodial wallets, like MetaMask or a hardware device, remove that convenience but also remove the middleman, meaning you alone are responsible for backing up your seed phrase.