Unit 4 · Level 1 · Keeping It Safe
Wallets & custody
When your crypto sits on an exchange, THEY hold the keys and you hold a promise. That's custodial. With your own wallet, YOU hold the keys, and the full responsibility. Hence the crypto saying: 'not your keys, not your coins.'
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What you get asked
Match the setup to its reality
Neither option is 'wrong'; they're trade-offs between convenience and control.
Your seed phrase is 12–24 words. Someone asks for it 'to verify your wallet'. What are they?
The seed phrase IS the wallet. Anyone who has it can take everything, from anywhere, instantly, irreversibly. This one fact prevents the most common crypto disaster.
History lesson: exchanges like Mt. Gox and FTX collapsed holding customer funds. What happened to users' crypto held there?
A promise is only as good as the promiser. This is why custody matters. Keeping trading amounts on a reputable exchange is reasonable; keeping life savings there is a risk you now understand.
A sensible split: keep ___ amounts on the exchange, move long-term holdings to self-custody.
Trade with what needs to be liquid; store what needs to be safe. Most experienced holders run exactly this split.
True or false: if you send crypto to a wrong address, support can reverse it.
No undo button exists. The pro habit: send a tiny test amount first, confirm it arrives, then send the rest. Thirty seconds of patience, disasters avoided. 🐜
The rest of this unit
Custody, wallets, broker protection, scams, and what actually moves prices.