Let's find out what storage methods are, which are worth using, and which should be kept away from.
Start with a bit of theory and terminology to get better acquainted with cryptocurrency asset storage technologies. First, you should understand that cryptocurrency "storage" services are called "wallets" only conventionally and for simplicity. All of your cryptos is stored in a blockchain, and wallets are services that interact with your crypto in the blockchain.
The main parameters of cryptocurrency storage services, i.e., wallets, are the way private keys are stored and the mode of operation.
Method of key storage (custodial or non-custodial wallets)
Custodial.
Private keys are stored by the service, accessed by password, codes in sms/e-mail/authenticators, etc.
Fast and convenient access.
Wide functionality, exchange operations, etc.
Low anonymity
Risk of sanctions and restrictions
Non-custodial
Private keys are kept directly from the user
Full control of assets
High anonymity
More complicated authorization
Wallet for crypto storage only
Impossibility to restore wallet if seed phrase is lost
Many people store their funds on cryptocurrency exchanges, which are examples of custodial wallets. Keeping funds on a business is convenient; you can trade in parallel, but keep in mind, if the conversation for some reason has questions for you, access to your crypto will be blocked in a second.
Mode of operation (hot and cold wallets)
Hot wallets are constantly connected to the network, work quickly and provide maximum functionality. Almost all hot wallets are custodial.
Constantly online
Easy to use
Low tamper resistance
Cold wallets are only connected to the network for a short period and only transmit transaction information to the blockchain. Their functionality is limited, but their hacking resistance is maximal.
Online only at the moment of transaction
High tamper resistance
Low usability
So, for long-term storage, cold wallets are better suited, but if you actively use cryptocurrency and often make transactions, you can only do with a hot wallet.
Sometimes hot wallets are confused with custodial wallets. This is a mistake, cold wallets are always non-custodial, but some hot wallets can be non-custodial too.
In terms of usage, wallets can be local, i.e., installed on the user's computer, mobile, i.e., on a smartphone, hardware, i.e., as a flash drive, online, i.e., as a website and even paper, i.e. printed on a piece of paper.Statistics: Posted by PiterWon — Sun Mar 19, 2023 11:47 am
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