From 2008, when it has been firstly presented to the world, cryptocurrencies became a very popular solution to make investments in and prosper. However, the trick with the business is that it is far from enough simply to get it, another factor of high importance is to store it properly. Therefore, in case you are interested in the obtaining of virtual coins, you have to know everything about crypto wallet possibilities as well.
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Ignorance toward the keeping of Bitcoins (BTS), Ethereum (ETH), Solana (SOL), or any other currency may lead to a dismal end and great financial losses. Statistics contend that more than 3 million of BTS alone is lost forever.
This article was created in order to help you to avoid such serious mishaps. Keep on reading to get to know what is a crypto wallet, and what types of it do exist?
Storing cryptocurrency in a custodial wallet
First things first, let’s get the meaning of cryptocurrency wallets explained. Speaking in simple terms, it is a software which enables all of the actions with your coins be it monitoring, transactions, storing of keys, etc. Also, it provides one with the opportunity to share and receive them. Resembles usual bank responsibilities.
Now, to the types existing.
One of the basic points when choosing a crypto wallet app is to decide whether it should be custodial or non-custodial. There are advantages and disadvantages by utilizing both of them.
- When it comes to custodial wallet the private keys are held by a third party. On one hand, it may seem a little bit creepy to ask a stranger for access to your own investments. On the other hand, it provides some sort of security if you lose access to data.
- Transactions in custodial wallets do not take place in the real time and otherwise in non-custodial.
- You won’t be able to use a custodial wallet offline.
- Non-custodial wallets are more about data privacy, since you yourself take care of the keys and do not apply for any authority.
It is regularly believed that non-custodial wallets are more comfortable and beneficial for customers.
Storing cryptocurrency in a cold wallet
The best crypto wallet in 2022 may be online as well as offline. The second are called cold wallets and are usually presented by a hardware device that by means of visuals and size resemble an ordinary memory stick. One needs to connect it to the computer, enter the password and voila – an access to your data. They function as follows:
- Depending on the specific device, cold wallets store limited types of coins. Some of them are able to store numerous types, while there are also those that can store only three or five.
- It is true crypto storing in cold wallets does not require an internet connection, anyway, the transactions are held online.
- There is an opportunity to recover currency if the wallet is lost.
Hardware wallets are extremely safe – they cannot be hacked, which is the biggest insecurity when it comes to digital data maintenance. To shortcomings we can include that it is not always convenient to connect them. Plus, it means additional investment. The price varies from $50 to $100 per device.
Storing cryptocurrency in a hot wallet
The storing that functions online solely is called hot crypto wallet. This appears to be a very convenient way of handling coins. Here are a few upper hands of utilizing it:
- Incredibly accessible. Wherever there is internet, no problem happens to conduct an activity through your account.
- User-friendly. Whether being in the form of an app or web-site, they are easy to navigate through.
- Do not require charges. There are multiple free offers on the market. The fact makes them seem more appealing than it actually should, but, anyway, it is what it is.
- Backup. They also allow recovery of data if needed.
The major disadvantage of hot wallets is that your account might become compromised. Unfortunately, high-technologies and online presence bring to our lives not only comfort and facilitation but new ways of fraud and criminal as well. Due to run out of security, currency can be stolen by hackers.
This fault does not mean to never use hot storing, however, do it wisely. If you possess not many coins or regularly send and receive them, it would be the perfect choice.
Storing cryptocurrency in a physical wallet
One more hack-proofed storage is physical (paper) wallets. They are printed QR codes of public and private keys.
In order to have one, online storage, like an app or website, is required (i.e. hot wallet) with the opportunity to print the keys. Afterwards you keep it as you would some crucial documentation or cash.
Note! Once the key is printed, it is automatically eliminated from the account. Further activity with it demands scanning of the code.
Nowadays they are not used as frequently as several years ago, since they are slightly out of date. It is like creating shop lists on paper instead of on a mobile phone. Plus, consider environmental reasons.
Time to sum up the aforementioned information.
How to select the best crypto wallet? The answer to this question can be based on your personal preferences and needs solely. Some would love everything to be easy and online, some demand to make most of the security, and so on. The main takeaways of keeping cryptocurrency are:
- It would be literally impossible without crypto wallets.
- Non-custodial options are considered as more reasonable ones.
- Choose cold wallets over hot if you are about to have a lot of coins in passive use.
- Hot wallet is the most convenient approach if you are an active user.
- Use a physical storage if you prefer to keep your finances ‘on hand’.