Truly 'owning' bitcoin means you alone control a string of 64-bit private keys. This is a tremendous empowerment, but also a heavy burden. This self-custody model liberates you from the banking system, but it also makes you the sole responsible party for the safety of your assets.
The huge risks of self-custody concentrate on two points: loss and theft. Once the private key or mnemonic phrase is forgotten or damaged, the corresponding assets will be permanently locked on the chain, and no one can help you retrieve them. It is estimated that millions of bitcoins have permanently disappeared as a result. At the same time, the device storing the private key may be infected with viruses, subjected to hacking, or fail due to physical damage.
Therefore, many users choose to store assets in centralized cryptocurrency exchanges (CEX). This brings convenience but introduces entirely new and greater systemic risks: the trading platform itself may collapse, be hacked, misappropriate user assets, or even commit fraud. The collapse of the FTX exchange is the most painful lesson. The digits in your exchange account are essentially just the platform's liability to you, not on-chain assets. Once the platform encounters problems, your assets may be lost completely.
In addition, there is a regulatory vacuum and legal risks. In most jurisdictions, the laws protecting cryptocurrency assets are not clear. If your assets are lost in a hacking incident, you may not be able to obtain compensation as you would for a credit card fraud.
⚠️ Soul searching question: When enjoying the freedom of “your own bank,” do you have the rigorous habit of managing private keys and a high level of cybersecurity awareness? When pursuing trading convenience by using exchanges, have you thoroughly investigated their reputation, transparency, and reserve situation? Does your security strategy keep pace with your investment ambitions?
