Proper storage is a major concern for people who want to avoid hacking and theft of their digital assets. One way to store your digital assets is through crypto wallets. This post covers all the information you need about hardware and exchange-based wallets: Hot vs cold crypto wallets
Crypto wallets serve as a storage system for your private keys. “Private keys” are the usernames and passwords for the wallets where your cryptocurrencies are stored. These crypto wallets come in both physical and digital forms.
Generally, hot wallets and cold wallets are the two main categories of cryptocurrency wallets.
Cold wallets are crypto wallets that are available in physical form and are not online. Cold wallets resemble and function similarly to a USB flash drive and are also known as hardware or hard wallets. A less commonly used type of cold wallet is the paper wallet.
Hot wallets are the devices that keep your digital assets online. Custodial (exchange-based) and non-custodial (web, mobile, and desktop) wallets are the primary types of hot wallets.
Hardware wallets
In contrast to software wallets, hardware wallets are completely offline and save your keys on a physical device, making them a secure way to store cryptocurrencies. You can access your wallet by connecting it to a computer with a USB port.
A password and PIN secure your private keys on the hardware wallet. Your keys will be almost impossible to recover if you lose your hardware wallet. Hackers or thieves cannot access your private keys because as you create transactions, your private keys never leave the physical hardware device and are never made public online. To ensure the security of your keys, the hardware device requests transactional information and then verifies the data.
Disadvantages of hard wallets
The drawbacks of hardware wallets are that you have to buy them, and they’re not as easy to manage as mobile wallets or exchange wallets. You need a computer and your hardware device to conduct any crypto transactions.
With only modest security checks, you can access your assets anywhere and whenever using an online or mobile wallet. However, for most hardware wallets, their increased level of security limits the functionality of those wallets.
In addition, hardware wallets don’t have enough storage to hold more than a few apps, cryptocurrencies, or wallets at once because they are offline.
Thus, hardware wallets are most suitable for users with some cryptocurrencies or long-term investors who don’t need access to their funds immediately.
Custodial (exchange-based) wallets
Based on guardianship, hot wallets are categorised into custodial (exchange) wallets and non-custodial wallets.
If registering with a crypto exchange such as Coinspot, Binance, or Crypto.com, you already have a custodial wallet. A custodial, or exchange-based wallet, is integrated within the platform or app used to purchase cryptocurrency and requires no further setup.
Advantages of custodial wallets
Because your exchange holds “custody” of your wallet, a custodial wallet is very user-friendly and necessitates less effort on your part in terms of password storage and security administration.
For investors who require immediate access to their digital assets for purchase and sale, custody wallets are a great choice. Let’s say you regularly reorganise your portfolio, buying ETH in the evening and selling some Bitcoin in the morning. The best option in that situation is a custodial wallet.
Additionally, because a third party administers your custodial wallet, it is simple to regain access to your wallet and your saved assets, even if you misplace your private key or forget the mnemonic phrase.
Another benefit of custodial wallets is the availability of backup services from the central organisation in charge of your wallet. Because of this, it is simpler to cancel any transaction or go back to a previous version.
Why is it safe to store crypto on CoinSpot?
Since 2013, CoinSpot has been the safest crypto platform in Australia and has never suffered a hack. In addition to the prestigious ISO 27001 certification, it complies with the standards set forth by the International Organisation for Standardisation and has completed an external audit by SCI Qual International.
The ISO27001 certification thoroughly analyses the organisation’s Information Security Management systems and procedures. This covers the administration of products, procedures, and intellectual property and the management of digital asset storage, employee, contractor, supplier, and customer information. To fight fraud and financial crimes, CoinSpot has also registered with Blockchain Australia, the Australian Digital Commerce Association, and AUSTRAC.
According to many CoinSpot reviews from users, the user-friendly wallet features of your CoinSpot wallet make sending and receiving digital assets a breeze. You can also exchange the cryptocurrency you have in your wallet for another. Say you wish to exchange some Dogecoin (DOGE) for Solana (SOL), for instance. You can do this easily right from the CoinSpot wallet.
When you make a purchase, the cryptocurrencies are automatically assigned to the correct wallet in your CoinSpot account. You can examine all your wallets on the Wallets page or only the ones where you currently have coins. The Wallets page will also show each wallet’s balance, the current price, a 24-hour percentage change, and an approximation of the AUD value. By choosing “Hide Zero Balance,” you can conceal wallets with no balance.
Conclusion
Knowing what you want to accomplish can help you choose the best crypto wallet. A few things should be considered when selecting a cryptocurrency wallet platform:
- What do you plan to do with your cryptocurrency?
- How anonymous do you want to be?
- How quickly do you want to do it?
If a wallet is all you need, the decision is simple. Any wallet should work. However, consider custodial wallets if you’re seeking a secure and more convenient way to store and use your digital assets.
