Week 17 — Trusts Meet Crypto: CEX vs DEX

How to custody and trade crypto — centralized vs decentralized, and what it means for control.

Week 17 of 52 · ~6 hours · 13 slides · exam + project

📖 Study these courses this week

Complete these two courses, then do the Deep Dive below, pass the exam, and finish the project.

📚 Creating Your First TrustStep-by-step: document, EIN, notary, funding. Budget $200-3000.15 slides 📚 CEX vs DEXCentralized vs decentralized exchanges. FTX lessons. Self-custody.16 slides

Custody & Exchanges

Not your keys, not your coins — and what that really means.

What you will learn

Compare CEX and DEX tradeoffs
Understand custody and its risks
Explain why self-custody matters

Keys and custody

How an exchange matches orders

CEX vs DEX

A CEX (Binance, Coinbase) holds your funds, matches orders off-chain, and is fast and easy — but it's a custodian with a single point of failure and control. A DEX (Uniswap) lets you trade directly from your wallet via smart contracts — you keep control, but you own the mistakes and pay gas.

💡 Not your keys, not your coins

When you hold crypto on a CEX, the exchange holds the private keys — you have an IOU, not the asset. If the exchange is hacked, insolvent, or freezes your account, your 'coins' can vanish. FTX, Mt. Gox, and many others proved this painfully.

The custody spectrum

There are three levels: full custody (exchange holds keys), self-custody (you hold keys in a wallet), and hardware custody (keys on a device never connected to the internet). More control means more responsibility — there's no 'forgot password' on a self-custodied wallet.

When each makes sense

CEX is reasonable for small amounts and active trading. Self-custody is right for significant, long-term holdings. The rule: never leave more on an exchange than you're willing to lose, and treat self-custody keys like bearer bonds.

💡 The seed phrase

Your wallet's 12-24 word seed phrase IS your money. Anyone with it can spend everything. Store it offline, never screenshot it, never type it into a website. Losing the seed = losing the funds forever. This is the price of true ownership.

Custody & the trust idea

Notice the parallel: a CEX is a trustee holding assets for you (beneficiary), while self-custody makes you your own trustee. Understanding trust structures — legal and cryptographic — is the through-line of this whole program.

❓ Quick check

'Not your keys, not your coins' means:

A) Exchanges are safe

B) If you don't hold the private keys, you don't truly own the asset

C) Keys are optional

D) Coins are physical

(Knowledge check — full exam is next)

Key takeaways

CEX = convenience + custody risk; DEX = control + responsibility
Self-custody = you hold keys; the seed phrase IS the money
Treat significant holdings with hardware/self-custody

📝 Weekly Exam — pass with 80% to unlock next week

10 questions. Review the Deep Dive and courses before attempting.

1. On a CEX, who holds your private keys?

The exchange is the custodian.

2. The main risk of leaving funds on a CEX is:

Counterparty risk.

3. A DEX lets you trade:

Non-custodial, on-chain.

4. Your seed phrase is:

Seed = full control of funds.

5. Hardware custody means:

Cold storage = offline keys.

6. The safest place for long-term significant holdings is:

Cold/self-custody for large holdings.

7. A CEX is like a ___ in trust terms:

The exchange is your custodian/trustee.

8. Self-custody makes you your own:

You hold and control the keys.

9. Losing your seed phrase means:

No seed = no recovery.

10. The right rule for CEX holdings is:

Limit custodial exposure.

Your score: —

🛠 Weekly Project

Set up a self-custody wallet (testnet or small amount).

Install a reputable non-custodial wallet.

Write down your seed phrase on paper (offline).

Receive a tiny amount to a testnet or mainnet address.

Send a small amount to a second address to practice signing.

Write one sentence on what you now control vs. what a CEX would control.

Open tool →

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