Off-exchange holding refers to the practice of storing digital assets in self-custodied wallets or other storage solutions not directly controlled by a centralized cryptocurrency exchange. This method provides the asset owner with direct control over their private keys, enhancing security against exchange-specific risks like hacks or insolvency. It represents a shift away from third-party custody. Such holdings are a fundamental aspect of digital asset ownership.
Context
The trend of off-exchange holding is a recurring theme in crypto news, especially after incidents involving exchange failures or security breaches, as investors prioritize direct control over their assets. On-chain data tracking outflows from exchanges often provides insights into this behavior. A key debate involves balancing the convenience of exchange custody with the security and autonomy of self-custody. Critical future developments include user-friendly self-custody solutions and improved hardware wallet technologies to facilitate this practice.
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