Digital Asset Custodians offer safekeeping of customer’s digital assets. This is accomplished by using cryptographic encryption in order to safely secure private digital keys.
Custodians ensure safekeeping of the digital asset by holding the private key of the owner of the asset, so no one can access the digital asset. Digital assets are built with encryption that secures a record of the transaction on a distributed ledger making it nearly impossible to alter, bringing an extra level of security to this space.
There are various methods of custody such as self-custody, exchange wallets, and third-party custody. Each option has its advantages and disadvantages. Investors can hold their digital assets in cold storage where private keys are stored offline, hot storage where keys are accessed online via private key, through multi-signature wallets which requires provides an additional layer of security to hot wallets, and lastly on smart contract wallets which are specific to custody of smart contract protocols such as Ethereum or Cardano.