Cryptocurrency is held in one of two ways: on an exchange, where a platform manages your funds on your behalf, or in a self-custody wallet, where you hold your own private keys and have direct control over your assets.
Exchanges
An exchange (also called a custodial wallet) is a platform that holds your crypto on your behalf.
You typically sign up with an email address and password, and complete identity verification (KYC).
The platform manages your private keys.
To move your funds, you sign in and transact through the platform.
If you forget your password, you can recover access to your account.
Examples: Coinbase, Binance, Kraken, Bitget, Nubank, Mercado Bitcoin, OKX, Bybit, Foxbit.
Self-custody wallets
A self-custody wallet (also called a self-hosted or non-custodial wallet) gives you direct control over your crypto.
Your private keys are stored on your own device.
During setup, you receive a recovery phrase (typically 12 or 24 words), which should be stored carefully and kept confidential.
This phrase is the only way to access your funds. If you lose it, no one can help you recover access.
Self-custody wallets include:
Mobile apps (like Base, MetaMask, Phantom, Exodus, and Trust Wallet).
Browser extensions.
Hardware devices (like Tangem, Ledger and Trezor).
Apps that connect your wallet to decentralized protocols (like Uniswap or Polymarket).
How to tell the difference
If you can recover access to your account by contacting the platform or resetting your credentials, it's an exchange (custodial wallet).
If you received a recovery phrase during setup and control your own private keys, it's a self-custody wallet.