Lesson 1 of 2 · 5 min
Exchanges vs. self-custody wallets
An account a company manages, or a wallet only you control.
Lesson
There are two main ways to hold crypto. Knowing which one you're using changes how you stay safe.
Exchange accounts (custodial)
An exchange like Coinbase is a company. You sign up with email and a password, verify your identity, and can buy crypto with regular money. The company holds the keys for you.
- Feels familiar, like a bank or brokerage app.
- If you forget your password, there's an account recovery process.
- You depend on the company's security and rules.
Self-custody wallets
Apps like Phantom and MetaMask let you hold your own keys. There's no account to reset.
- You — and only you — control the funds.
- You can connect to apps on the blockchain directly.
- If you lose your recovery phrase, nobody can restore access.
Not either/or
Many people use both: an exchange to turn regular money into crypto, and a wallet for self-custody and on-chain apps. Note that Coinbase also makes a separate self-custody wallet — it's a different product from the Coinbase exchange app.
Key points
- Exchange = a company holds the keys for you.
- Self-custody wallet = you hold the keys.
- Exchanges have password recovery; wallets rely on your recovery phrase.
- Many people use both for different jobs.
Guided practice
Exchange or wallet?
Sort each description into the right bucket.
Scenario 1 of 8
Quick quiz
Further reading
Official learning pages we used as sources. L2E is independent and not affiliated with these companies.