There is little to no debate that self-custodial Bitcoin and Lightning wallets are the most ideal from a censorship-resistant, resilient, and sovereign way to custody and spend your bitcoin. A self-custodial or non-custodial wallet is a wallet where you have access to your private keys for your Bitcoin. You have full control over your funds. A custodial wallet is when a third-party holds the private keys to your Bitcoin or is in some way custodying the means to access your funds. This means the custodian could censor, freeze, or otherwise control or take your Bitcoin. A threat actor who attacks the custodian could likewise do the same. These facts cause people to get very animated and angry about the value, notion, or mention of any form of custodial wallet.
Self-custodial is definitely ideal, in an ideal world.
But, this world aint that.
Before you chant “custodial bad, self-custodial good”, grab some context with your black and white coffee. Binary framing of custodial versus self-custodial ignores some real-world shitstorms where custodial solutions not only enable Bitcoin transactions for real world needs, and actually save lives or at least preserve life-saving funds.
Self-Custodial In High-Fee Environments and Low Values of Sats
On the date of this writing, fees are low. But that's not always the case.
During times of high activity, transaction fees can skyrocket" — Reddit
In the global south, Bitcoin can be very useful as a medium-of-exchange-in low-fee environment. In high-fee environments, paying $20 to open a Lightning channel for a $25 transaction, does NOT work. Anita Posch of Bitcoin for Fairness and Crack the Orange–works in the Global South to enable both education and enablement of education via train the trainers programs. At the 2024 BTC Prague conference, she discussed how she gets constant feedback on material issues that occur when fees are high.
In high-fee environments in the Global South, people need to get creative in order to use Bitcoin for spending. This usually means custodial solutions like Wallet of Satoshi or Liquid network (via Aqua). For people with small amounts of satoshis amidst high fees, they sometimes start with a custodial wallet, then move to self-custodial when they have accumulated a higher stack of sats.
In 2025, another option was implemented by both Blitz and Zeus wallets. Users can receive Cashu ecash into a custodial wallet and then move it to a self-custodial wallet when they have enough funds for a Lightning channels to transact via Lightning.
Self-custodial wallets just don't work for small holders of Bitcoin in high-fee environments or with lower amounts of money. Using a custodial wallet, the Liquid network, or a wallet that facilitates custodial to self-custodial funds are all useful options in the current wallet landscape.
Self-Custodial In Wartime
© Vladimir Efimov| Dreamstime.com
How do self-custodial wallets hold up in wartime, outages, bombs, drones, drones with bombs–situations where you, your phone, or computer can be obliterated or you might be forced to flee in a life-threatening hurry.
First, take the example of someone who is new to Bitcoin and is in the middle of an invasion or other violence or fog of war, a disorienting state way more taxing for cognitive functioning than your debilitating morning or afternoon brain stupor.
Very well-meaning Bitcoiners (including myself) would say to get yourself a self-custodial Lightning wallet, fund it with sats, open some Lightning channels, make payments or withdraw donations. (In addition, deal with all the issues when possible high-fee environments may be in play).
It’s a war, so make sure someone else has the seed in case you “go down” or your phone or computer is demolished. Teach this other person how to use this self-custodial Lightning wallet because if you think it’s hard to onboard people to BItcoin or Lightning wallets, try to onboard in the middle of a shitstorm of violence, hunger, or physical flight.
While onboarding others, make sure that your backup person doesn’t restore that self-custodial wallet with your seed while you are still using the wallet, because that will bork the Lightning channel state.
Make sure you communicate if you die or are disabled and can’t use the wallet and want to turn the funds over to your backup person. (Did we mention how communication means are not stable in war?) Net-net:
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The person in the midst of war or any sort of physical and emotional instability needs the simplest wallet they can get to onboard and use immediately.
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They need a wallet they can enable others to access should the worst befall them or their phone.
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They need a wallet that doesn’t require extra communication touch points and is easy and fast to download, send, and receive.
A custodial wallet CAN be the better option–despite the fact that the custodian could be forced to censor or freeze the funds. In these dire circumstances, a custodian could actually be seen as managing and safeguarding the funds.
Also, what if several people need to access the funds, or you need a backup person in case the main owner is killed or incapacitated? With some custodial wallets, multiple people can log into the same custodial account to access the funds. Being able to share credentials with a backup person who can log onto a custodial Lightning wallet at any time and use the funds, can actually save others’ lives in the case that one user’s life is ended.
We may soon have better solutions for people, with ease of cost and onboarding. As of this writing, that’s not the operationally state of the ecosystem. Even on nostr, allmost all wallets are custodial. And in most cases, wallets require Internet.
Self-Custodial Under Poor Internet
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To the above scenarios, add poor internet that is often the case in the Global South and certainly in war. In some situations, Internet is cut off in order to prevent communication or financial transactions. In other places, power outages are common, which takes down the Internet. In just the first few months of 2025, many large areas--including Cuba, Puerto Rico, Spain and Portugal--have had large-scale power outages.
Internet access is an issue for both self-custodial AND custodial lightning wallets.
With little to no internet, it’s useful to have a tool you can use to transfer funds offline to a person with poor or no internet who can then receive them later with Internet connectivity. Cashu--whatever brand of custodial you call it--can and has helped in these situations. Cashu wallets work in different ways in a couple of different Internet scenarios:
Table 1: Offline Cashu scenarios.
Note: For even more details, see this article Transacting with ecash while offline.
Cuba Bitcoin has a guide and information about how they use and have used Cashu ecash during power outages.
From Cuba Bitcoin Cashu site
For the Cuban Bitcoin group, "Cashu is not just a protocol, it is a way to empower the Cuban people." Under poor or no Internet, it's good to have different options that enable you to pay with and receive sats.
Finally, don't forget the privacy aspects of Cashu, which help in war and in authoritarian oppression. In this divided world, private transactions can also help protect views and action that may not be popular with the current and next regime of government and banking.
Means, Ends, and Privilege.
If it's is your best or only option for the situation, custodial is the way to go. In many cases, the means and the ability to self-custody–is a privilege. In other situations, custodial solutions are the best option to transact or receive life-saving donations to meet one’s basic needs.
In these cases, the custodial means justify the end of being able to use Bitcoin. If you’re starving, you’re going to eat what food you can get regardless of your morals about veggies, meat, or carbs and sugar. Same goes true for how you hold the money that you need to transact for your food, drink, and shelter.
Maslow said nothing about your custodial versus self-custodial puritanism--in his hierarchy of human needs.