Buying and selling crypto is one thing but holding it is quite a different thing. When you have the majority of cryptocurrency you should think about their security mostly. And here come crypto wallets with their special categories and tools.
Like cash stored in a wallet, digital assets are held in a crypto wallet. Crypto wallet is designed to send and receive digital currencies, control their balance and interact with various blockchains.
The crypto wallet also keeps the private and public keys. The public key is the address (account) to which users send digital money, it is visible to other users. The private key is used for a digital signature, without which it is impossible to make a transfer. Having a wallet is essential to manage your crypto assets and keep them safe.
Hot and cold wallets
There are many cryptocurrency wallets but the essential difference between them is whether they are hot or cold:
- The hot wallet is connected to the internet and is available at any time;
- A cold wallet is not connected to the internet and allows you to store funds offline. This one is also able to receive funds at any time, but only the owner can use them.
A cold wallet allows you to store funds offline. This one is also able to receive funds at any time, but only the owner can use them.
Hot wallets include all online cloud wallets, most mobile and software wallets and exchange wallets.
Cold wallets are hardware wallets, paper wallets, USB drives and similar data storage devices. It should be noted that a hardware wallet is one of the safest options for storing digital assets. Hardware wallets store private keys on an external device, like a USB. Some hardware wallets are compatible with web interfaces and support multiple currencies, which allows you not only to store cryptocurrency, but also to make online payments.
Custodial and non-custodial wallets
Depending on the presence of a custodian (third party), which is responsible for storing personal data, wallets are divided into custodial and non-custodial.
A custodial wallet is a wallet in which personal data is stored by a third party (custodian). This has its advantages: if passwords or keys are lost, the user will be able to regain access to their funds. Many crypto exchanges (Coinbase, Binance, etc.) and brokerage services have custodial wallets. Such integration simplifies the work with other tools of these platforms, it can be beneficial when making transactions.
As the keys are controlled by third parties it is important to approach the choice of a custodial wallet with particular care since the custodian’s access to the wallet is a disadvantage as well. The user may lose access to the wallet and funds because of authorities, court and a hacker attack too. Similar situations were in 2021 – the theft of user funds by employees of the Thodex cryptocurrency exchange and this year – the American Coinbase announced the blocking of wallets associated with Russian citizens and companies from US sanctions lists.
A non-custodial wallet gives the user full control over keys and funds. These wallets are created by decentralized exchanges and special services such as ZenGo, Nuri wallets. Similarly, non-custodial wallets can be created in special browser extensions (MetaMask). Such extensions provide an address and a private key after a simple registration procedure. A hardware wallet is also non-custodial.
A non-custodial wallets are suitable for long-term investments and asset storage, as they provide a high level of security. However, they also have disadvantages. If the private key and the phrase to recover it are lost, the funds will be irretrievably lost. Such wallets can be affected by a hacker attack as well.
Crypto portfolios for easy holding and tracking
Crypto portfolios are the next level to not only hold but also track your digital assets. A cryptocurrency portfolio is a website, app or another type of platform that allows you to manage all your crypto in one place. The majority of crypto portfolios have charts, graphs, specialized tools to see transactions and other details of your cryptocurrencies.
As most crypto traders store funds across multiple blockchains and use different wallets they are more likely to use crypto portfolios. They can connect multiple crypto accounts into one platform to see and manage them with guaranteed security and anonymity.
However, not only professional traders but also crypto amateurs prefer to use crypto portfolio trackers such as CoinTrack.ai. It is the simplest way to keep track of your cryptocurrency and control them wherever you are.
In the fast-growing crypto market traders have a huge opportunity to choose different platforms based on their preferences and needs. They can store crypto in a secure wallet and create a portfolio to manage all in one easily in case of having multiple crypto accounts.