Tangem reports that self-custody is widely valued, yet most users still rely on exchanges thanks to misconceptions and confidence gaps.
Tangem and Protocol Theory recently released From Storage to Participation: The Rise of Active Self-Custody, an independent research report.
The report’s data shows a persistent contradiction at the heart of the crypto industry. While 66% of users say self-custody is important, the vast majority of around 88% continue to rely on centralised exchanges (CEXs) to manage their assets.
This disconnect defines what can be described as the “Self-Custody Gap”: a divide between the value users place on control and independence, and the reality of how they behave. According to the report, this gap is not incidental but rooted in long-standing assumptions that frame self-custody as a static storage solution rather than an active tool for participation.
This tension becomes more apparent when viewed through the lens of security. Major exchange breaches rank as the second-largest concern among both existing users and prospective entrants. Yet despite these risks, only a small proportion of users, or roughly 1 in 6, have adopted cold wallets designed to mitigate counterparty exposure.
Familiarity appears to play a decisive role. Nearly all users (97%) are familiar with CEXs, compared to just 67% for cold wallets. As a result, users tend to gravitate toward platforms they understand, reinforcing the perception of exchanges as the “convenience layer,” even when they are aware of the associated risks.
A key factor underpinning this behaviour is the way self-custody is perceived. For 32% of non-users, the primary barrier is not cost or technical complexity, but a belief that such tools are unnecessary. This perception is shaped by a widely held “vault” mental model, where cold wallets are seen as instruments for long-term storage, reserved for users with large holdings.
Within this framework, exchanges are associated with activity, while self-custody is relegated to passive holding. However, the report challenges this distinction. Data shows that active traders are 1.83 times more likely to use cold wallets than passive holders, indicating that self-custody is not confined to inactivity but is increasingly embedded in day-to-day engagement with digital assets.
Beyond perception, a deeper psychological barrier also emerges. Self-custody fundamentally shifts responsibility from institutions to individuals, requiring users to manage their own security and risk. This transition introduces a level of perceived irreversibility that many find difficult to accept.
Around 70% of users fear losing funds if their wallet is lost or damaged, while 62% are concerned about making irreversible transaction errors. These concerns contribute to a broader confidence gap, particularly among non-users, only a third of whom report high confidence in managing self-custodied assets.
Importantly, the report suggests that these fears are often overstated. Users without direct experience tend to overestimate the complexity of self-custody, while those who have used cold wallets report a significantly narrower usability gap. In practice, familiarity reshapes perception, transforming self-custody from a perceived “vault” into a functional control layer that integrates storage, activity, and ownership.
Taken together, these findings indicate that the Self-Custody Gap is less a reflection of resistance and more a product of misunderstanding and hesitation. As perceptions evolve and experience increases, the role of self-custody may continue to expand beyond passive storage, positioning it as a central interface for participation in the crypto ecosystem.
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