How to self-custody bitcoin step-by-step in 2025: Beginner’s guide
Bitcoin was made for self-custody, allowing you to become the true and sole owner of your money. Therefore, when you start stacking BTC, you’ll need to decide whether you want to use this exceptional feature to its fullest and become a truly sovereign individual when it comes to using and storing your money. To do so, first, explore these questions:
- What is bitcoin self-custody?
- Should I self-custody my bitcoin?
- What is the best custody for bitcoin?
Next, follow these steps to start self-custodying BTC:
- Decide which bitcoin self-custody model is right for you
- Choose a bitcoin wallet
- Set up, back up, test, and fund your wallet
- Maintain your wallet and upgrade your setup according to your needs
Read on and learn about the self-custody basics and how you can start your journey of becoming a sovereign money user.
What is bitcoin self-custody?
Bitcoin self-custody means you own and control your BTC directly, without relying on a third party.
In contrast to custodial setups, such as those provided by an exchange, self-custodial wallets do not control your BTC, and you don’t need anyone’s permission to use your bitcoin whenever you want. In comparison, your ability to use your money in a bank depends on the bank itself: they can withhold your funds for whatever reason, go bankrupt, etc. By self-custodying your BTC, you remove similar risks since you don’t need to trust your funds with anyone else.
Should I self-custody my bitcoin?
Whether you should self-custody your bitcoin essentially depends on your needs: do you want to control your BTC and enjoy the benefits that come with it, or would you rather trust a third party?
By going the self-custody route, you’ll be responsible for securing your private keys and seed words. If you lose them, you lose your bitcoin. However, using a custodial wallet doesn’t guarantee you can’t lose your funds either. Even the largest companies can get hacked, go bankrupt, or be compromised in other ways, including the company and/or your funds being taken over by the state.
In either case, while bitcoin self-custody might look difficult at first, it’s simply different from what we’re used to when it comes to storing money. Moreover, self-custody can not only be safer by removing third-party risks, but also better by offering greater privacy, helping you to avoid registration and the requirement to share your sensitive personal information, while tailoring security to your needs and solving issues such as bitcoin inheritance. What’s more, there are ways to protect yourself against BTC loss and even insure your self-custodied bitcoin.
Bitcoin self-custody vs. a custodial wallet
| Bitcoin self-custody | A custodial wallet | |
|---|---|---|
| You control your BTC | Yes | No |
| You’re responsible for securing your BTC | Yes | No, but you still need to secure access to your account |
| Registration/privacy | No need to sign up, better privacy | You need a registered account, which hurts your privacy |
| Custom custody setups | Yes | No |
| Bitcoin features, such as timelocks | Yes | No |
What is the best custody for bitcoin?
The best custody for bitcoin is the one that fits your needs and your ability to secure the funds properly.
Think of it more as a journey rather than a fixed destination. Where you begin depends on the size of your bitcoin stash, how you’re using it, the risks you face, and your knowledge of self-custody techniques.
You can also have different setups for different wallets. For example, a wallet for small amounts of BTC, e.g., for daily needs, can be much simpler than your savings wallet, which you access rarely. As your bitcoin portfolio grows in BTC and/or fiat terms, you can always upgrade your setup by adding extra security measures and using the latest available self-custody solutions.
Watch Liana’s Kevin explaining safer bitcoin self-custody.
Bitcoin self-custody step-by-step
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Decide which bitcoin self-custody model is right for you
To secure a small amount of BTC, one that wouldn’t be too painful to lose, a simple non-custodial wallet will work. You just need to back up your seed words in case you lose access to your wallet, so you can recover it. Since the BTC amount is small, you don’t need a complex setup for securing your seed words, and they can simply be stored on a piece of paper at home.
For your BTC savings, you should use a hardware wallet that stores your private keys offline. Since this could be a life-changing sum, invest more in securing your seed words. This can be done by engraving them on a steel plate and hiding it securely, possibly even outside your home. There are many backup solutions and setups available on the market. For example, for a more advanced yet still simple setup, you can use the Liana wallet combined with a Ledger or BitBox hardware wallet and a Cryptosteel capsule to secure your seed words. These can even be purchased as a bundle for a more secure setup, offering multiple signing devices and even an inheritance letter.
To strengthen your self-custodial bitcoin castle further, look into solutions such as multisig, passphrases, and other backup techniques. However, remember not to overcomplicate your setup, as this might introduce extra risks, for example, forgetting how it all works or misplacing multiple seed word backups for your multisig setup. You need to find the right balance, which is a personal choice.
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Choose a bitcoin wallet
Again, you can choose a simple non-custodial wallet for your daily needs and small payments, especially if it supports fast and cheap BTC transactions via the Lightning Network.
As with software wallets, there’s no single “best” hardware wallet. Each has its own advantages and drawbacks. For example, you may prefer open-source or closed-source wallets, multi-asset devices, or bitcoin-only devices etc.
Also consider features for your hardware and software: Liana, for example, offers a timelock feature for inheritance planning, a Safety Net for extra security, and multiple multisig options. Hardware devices should support Miniscript if you want them to work with Liana.
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Set up, back up, test, and fund your wallet
After setting up your wallet, back up your seed words. Test your setup: send a small amount of BTC to your wallet, delete the wallet, then restore it using your seed words. Once you confirm everything works, transfer your main funds.
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Maintain your wallet and upgrade your setup according to your needs
While you usually don’t need to worry much about wallets for daily payments, you should put more effort into ensuring your savings wallet remains secure. For example, check that your seed words are still safe and that no one has accessed them. If you’re using Liana’s timelock feature, check your setup once a year (or once every 15 months, the current maximum timelock period).
As your portfolio grows, risks change, new security measures appear, and your knowledge improves, review your self-custody setup so it fits your needs and secures your money properly.
Start self-custodying bitcoin and become the master of your coins
Freedom comes with responsibility, and Bitcoin is no different. To store your BTC without relying on a third party, you’ll need to learn new things and secure your funds. It’s not harder than securing other valuables; it just might feel unfamiliar at first.
Start with a simple bitcoin self-custody setup and learn your way toward implementing new security measures, if and when you need them.
Download Liana now and create your custom self-custody bitcoin wallet.
FAQ
How to take self-custody of bitcoin?
To take self-custody of bitcoin, you’ll need a self-custodial wallet. This type of wallet doesn’t control your private keys, giving you independence from a third party. However, by self-custodying bitcoin, you’ll be responsible for securing it, for example, by protecting your seed phrase. Just remember: never store it in digital form and never enter it on any website.
What is the safest way to self-custody bitcoin?
The safest way to self-custody bitcoin is to ensure no one can access your wallet or your seed words. The exact method depends on the size of your portfolio, the risks you face, and your technical know-how. A small amount can be secured with a simple setup, while your BTC savings require a more advanced one.
Is it better to own bitcoin or an ETF?
It depends on your needs. If you want full control of your bitcoin, you need to store it in a self-custodial wallet, such as Liana. If you only want exposure to BTC’s price appreciation, an ETF might be enough. However, with an ETF, you won’t be able to use BTC in an emergency, for example, if the banking system goes down.