Definition ∞ Distributed custody is a method of securing digital assets where control over private keys is divided among multiple parties or locations. This approach mitigates single points of failure by requiring a threshold of these distributed key fragments to authorize a transaction. It enhances security against theft or loss by preventing any single entity from having complete control. Distributed custody is a key security measure for institutional digital asset management.
Context ∞ Distributed custody solutions are gaining prominence as institutions seek more robust security for their digital asset holdings, moving beyond single-point key management. Debates often concern the optimal number of key holders, the cryptographic techniques employed, and the regulatory recognition of such decentralized security models. The development of multi-party computation (MPC) and threshold signature schemes are advancing the capabilities and adoption of distributed custody.
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