Definition ∞ Custodial vulnerability refers to a weakness in the security systems of an entity responsible for holding digital assets on behalf of others. Such a vulnerability could permit unauthorized access, theft, or loss of the stored assets. These weaknesses can stem from inadequate cybersecurity protocols, operational failures, or insider threats. Custodial services, like centralized exchanges, are particularly susceptible.
Context ∞ Custodial vulnerability remains a significant concern for digital asset holders and regulators, driving discussions around self-custody solutions and improved security standards. The situation often involves balancing convenience with robust asset protection. Future developments point towards hardware security modules and multi-party computation to mitigate these risks.
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