"It’s a bitter pill for the self-sovereignty maximalists to swallow, but third party custodians will always exist: it’s more convenient for traders, the technophobic and the lazy to simply have their magic internet money held on their behalf. Entrusting an exchange with your cryptocurrency, however, carries with it a significant amount of counterparty risk. Not only are you hoping that the service’s security is ironclad enough to defend from cyberattacks (easier said than done, by the looks of things), but you’re also working on the assumption that the company behind the exchange isn’t misleading you. One of the trade-offs you make when you relinquish control over your coins (aside from control itself, that is) is the loss of your ability to verify the existence and ownership of those UTXOs."