Each of us very concerned about how safe is our digital assets. As we know there is a lot of scammers nowadays so one of the way to keep your digital assets safe is by storing in your wallets. There are two types of wallets: custodial and non custodial wallets. They can either be hot or cold crypto wallets. The difference between hot or cold is whether the signing keys are connected to the internet.
Cold wallets
Hardware devices that you connect via USB to your computer. Once you are offline, your funds cannot be accessed. Examples of non custodial wallets include brands such as Ledger and Trezor, which sell secure hardware USB and have been around for years. Cold wallet is typically operated by third party digital asset companies with deep knowledge in cryptography, finance, and operational security.
Hot wallets
Hot wallets are those that are accessible online. The most widely used custodial hot wallets, for example when you open a Huobi or luno account, the exchange opens a wallet with a public address for you automatically, but they hold the private keys.
Custodial wallets
Custodial wallets are convenient for trading, but carry risk such as hackers or inaccessible due to financial regulation. For example, recently binance was banned by the Malaysian government. The risks of sudden changes in regulatory rules being imposed means losing access to your assets without any resources.You just have to remember that using custodial wallets, either its hot or cold, that means you are essentially trusting them with your funds.
Non Custodial wallets
Non Custodial wallets have sole control on your private keys, so basically you are the only one that controls your crypto and you have to write down the private keys on a piece of paper and keep it at a safe place. Meta Mask is the most famous and widely integrated non custodial, hot wallet provider. It’s available as a browser extension and free to create.
If you want to hold a big amount of crypto for long-term, it’s essential to have a cold hardware wallet. When you decide to get a cold wallet, you should buy from reputable suppliers to prevent your cold wallets from being tampered with before you even use them. There are local authorities such as Crypto Bilis (www.cryptobilis.com)
All the wallets are built differently, so cross platform compatibility and the ease with which you interact with your wallet should also be considered. You can have multiple wallets such as:
- Desktop
- Browser-based
- Hardware
- Mobile app
