Where your keys live

Hot, warm, cold, exchange, institutional. Five words people use as if they mean safe or risky, when they actually answer two much simpler questions: who holds the key, and is that key connected. Pick a place below, then send a payment from it and watch exactly who does each step, and who could say no.

Educational. Not financial or investment advice. Nothing here touches a real wallet.

The five places

The first three are your key, held differently. The last two are somebody else's key, held on your behalf. That line matters more than any of the words.

◀ your key, connectedyour key, offlinetheir key ▶

Now send a payment from it

A transaction is the same five steps on every network: decide, build, sign, broadcast, confirm. What changes between these five places is who performs each one. Watch the custodial options carefully, because they grow a sixth step that self-custody simply does not have.

What the words actually mean

Hot, warm and cold describe connectivity, not safety. They tell you how quickly your key can sign, and therefore how quickly a mistake or an attacker can too. A cold wallet nobody can find is not safe.
Exchange and institutional custody describe who signs at all. Not how careful they are. A regulated custodian may be exactly the right answer for some holders, and an exchange is still a claim on a company.
The wallet app is an interface, not a vault. It builds the transaction, signs it with your key, and broadcasts it. Your coins never live inside it, which is why the same recovery words open the same holdings in a different app.
Most people end up on more than one spot, and that is fine. Not knowing which spot each holding sits on is the actual problem.

Decoded · Lesson 7

Keys, wallets, custody

The lesson this tool comes from: why ownership is possession of a key, and what a wallet really holds.

Decoded · Intermediate

Custody Operations

Design custody for a household, name its single points of failure, then let a year of bad luck attack it.

Method and sources. The five custody arrangements and their failure modes follow the vocabulary of our Keys, Wallets, and Custody lesson and the free Wallets and Custody guide; the exchange-failure pattern is documented in our Regulatory Library (CSA pre-registration undertakings, post-FTX). This is a conceptual teaching taxonomy, not a review of any product. Content last reviewed July 2026.

Position Clarity. Directional education only, not financial or investment advice, and not personalized to your circumstances. Position Clarity is not registered with any Canadian securities regulator. The five categories are the industry's ordinary working vocabulary rather than legal definitions; the meaning of a qualified or institutional custodian in particular varies by jurisdiction and by firm, so treat this as a map and confirm specifics with the provider and a licensed professional. Nothing here connects to a wallet, a network, or an account. More at the Decoded course and the other free tools.