When asked how to explain the importance of self custody to a bitcoin newbie -

One way to convey the importance of self-custody to a Bitcoin novice is to explain that Bitcoin is a decentralized digital asset that is designed to eliminate the need for trusted third parties, such as banks or other financial institutions. When Bitcoin is held on a centralized exchange or custodial service, it effectively reintroduces the need for a trusted third party, creating counterparty risk.

Counterparty risk is the risk that the other party in a transaction will fail to fulfill their obligations, leading to financial loss. When Bitcoin is held on a centralized exchange or custodial service, the user is relying on that third party to secure their assets and fulfill their obligations, introducing a level of counterparty risk.

On the other hand, self-custody of Bitcoin means that the user has complete control over their own assets, without relying on a third party to secure and manage them. This eliminates the counterparty risk associated with centralized custody and ensures that the user is in full control of their own financial assets.

To further simplify the concept, you could explain that self-custody of Bitcoin is like keeping cash in a personal safe at home, while leaving it on a centralized exchange or custodial service is like keeping it in a bank. While banks may have security measures in place, they also introduce a level of counterparty risk. Similarly, while centralized exchanges or custodial services may offer convenience, they also introduce counterparty risk, while self-custody eliminates that risk.