Cryptocurrency investors need to be aware of the different options for storing crypto safely in order to protect their investments. Doing that comes with unique security protocols, such as keeping private keys safe. There are three main crypto storage options available: custodial wallets, cold (offline) wallets, and hot (online) wallets. Each option has several advantages and a few drawbacks depending on your needs, so it’s important to understand them before deciding which one is best for you. This article will help you in making that decision.
A custodial wallet is a type of crypto wallet that is managed by another person or company. It is easy to use and you don’t have to worry about losing it, as long as you can access your account. The good thing about custodial wallets is that they require the least amount of work on your part, and it’s easy to access if you want to trade your assets. But the bad thing is that a third party controls your crypto, which means you are relying on them for security instead of yourself.
The process of storing crypto on a custodial wallet is relatively simple. All you have to do is create an account with a platform and deposit your crypto. Once it’s deposited, the platform will store your crypto securely. You can check your balance at any time and use the platform’s services to trade or withdraw funds. If you do choose this type of wallet to store your assets, we advise you to go for platforms with strong security protocols; like Binance.
Cold (offline) wallets are a popular storage option among cryptocurrency investors strictly looking to protect their funds from cyber threats and have full control of their assets. These wallets store your private keys and public addresses on an encrypted piece of hardware, usually a physical device such as a USB drive. They are considered the safest way to hold crypto since they keep them offline and away from malicious actors.
The process of storing crypto on a cold wallet is far more complicated than custodial wallets, as it requires you to create and back up your wallet before you can start depositing funds. This means that you will have access to the private keys which grant you full control over your assets. These private keys are to be kept safely at a location, preferably, only you know. The downside of cold wallets is that they can be difficult to use, especially for those who are not tech-savvy, but you can always ask for help or check out YouTube for tutorials.
Hot (online) wallets are another popular option for storing cryptocurrency. These digital wallets are located on secure servers that can be accessed through a web browser or special mobile applications. The convenience of hot wallets makes them the perfect choice for day-to-day transactions, as they allow users to store and access their funds quickly and easily.
The process of setting up and using a hot wallet is very similar to that of custodial wallets. All you have to do is create an account with a platform, deposit your funds, and then use the platform for buying or selling crypto. The main difference between these two types of wallets is that you don’t have access to your private keys with a hot wallet, so it’s not considered to be as secure as cold or custodial wallets.
When it comes to choosing a crypto storage option, you should take into account your needs and the amount of risk you are willing to take. Hot wallets are great for smaller amounts of money that you plan on using regularly but they are not recommended for large amounts of crypto assets, as they are more prone to hacks. Cold wallets offer the highest level of security but require you to keep your private keys safe and secure. Custodial wallets might be the right option if you need easy access to your funds or don’t want to worry about managing them yourself. Whichever wallet you go for, make sure to keep your passwords secure and research the provider before making any deposits.