How does Bitcoin custody work?

How does Bitcoin custody work?
January 03 12:18 2015 Print This Article

For Bitcoin (BTC) custody – which means making a certain amount of BTC available to another party as a guarantee for a particular contract or transaction – you can request a custody order. This order will be sent to another user and stored in an offline wallet for the duration of the custody contract. During this time, this other party will have no access to the BTC for any type of commercial trade or financial transaction: the currency will be held on your behalf, merely as a guarantee. At any time, this guarantee can be returned to the owner of the custody contract. By the end of the contract, the BTC is returned to the owner of the contract with an added charge of a transference fee varying from 0.1% to 0.4%. This type of custody can be used to guarantee property rental, hiring of staff and even in certain debt negotiations.

BTC can be considered a cryptographic commodity. It has no centralized issuer and no central authority is responsible for controlling the process.Image result for How does Bitcoin custody work?

What guarantees the other party won’t disappear with my Bitcoin (BTC) when the contract expires?

As per any agreement or business, the first step is guaranteeing a simple, but detailed and effective, contract will be drafted. Once this contract has been signed by all parties involved and their personal details have been proven by the necessary documentation and notarization, you can choose to include or not this contract in your custody transaction. Please note this contract will not be valid if you choose to transfer the BTC prior to it being signed, proven and notarized!

Once those steps have been taken, you are in business: the BTC will be held in custody just as any other asset would, to guarantee any type of contract you wish.

What are the differences between the storage, purchase, sale, trading, lending and custody Exchanges?

One of the key aspects of the Bitcoin (BTC) ecosystem is the Exchange. It works roughly as any stock exchange would, and it allows for the exchange of local currency for BTC and vice versa.

The Bitcoin Exchange is naught but a trading platform for buying and selling BTC. You start by making a deposit into your trading account and follow by getting a piece of the action for this once again rising trend.

Storage Exchange!

Using a decentralized system, the blockchain, it allows for storing financial transactions without the need for a mediator: you can send and receive BTC without any cost!

Purchase and Sale Exchange!

Using a similar decentralized storing system, it offers additional services such as buying and selling through centralized currencies – like Dollars, Euros and such – according to the country of origin for the particular platform.

Trading Exchange!

Also a Purchase and Sale Exchange, this type of platform focuses on trading currencies, earning small commission payments from both buyers and sellers!

Lending Exchange!

Is it possible to lend out money and acquire loans in the form of Bitcoin (BTC)? Yes: this type of transaction is called “peer-to-peer lending” or “p2p lending”.

BTC is a parallel economy and, as such, there are always superavit agents and deficit agents – or, in simpler terms, people who spend and people who save. Certain companies have decided to take advantage of that fact, and those are the creators of the “peer-to-peer lending” system.

These companies offer a secure location where users can create adds offering or requesting BTC loans, avoiding the red tape involved in a standard bank loan. To participate you need only register and create your add. In some cases, the “market” of the platform will determine interest levels. In other, the website itself will make those calculations based on your credit records (in the platform). Digitally signed contracts will guarantee lenders are safeguarded from a legal point of view, and also allow users to make some money from their BTC reserves.

Custody Exchange!

This platform also employs blockchain systems, allowing for financial transactions to be stored by a mediator. You can send and receive BTC, set up custody contracts to guarantee other agreements and business transactions and have access to the “peer-to-peer lending” system, which allows you to profit with each transaction made!

Many available platforms employ cold storage systems that guarantee extreme levels of safety for users and their portfolios. That means your data is stored in a safe location, not connected to the web: a great safeguard against computer malfunctions. To further increase safety, many platforms are also employing mixed accounts that come with a special BTC track eraser – asides from erasing all information regarding the traded BTC, this function further guarantees safety by storing your remaining assets in an offline wallet!

We analyze and according to surveys, the two best bitcoin platforms for custody are Bits Payments ( and Bit CXE (


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Jena Shepherd
Jena Shepherd

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