Cold and Hot Storage versus Custodial and Non-Custodial WalletsNovember 30, 2018
A split in the blockchain brings in a world of confusion to an average individual who is new to the blockchain world. They are not sure of how they should be reacting to the outcome of a fork.
With increasing numbers of wallet providers, it is easy to keep your cryptocurrency in a safe. Several exchanges and wallets are providing storage solutions.
Third-party exchanges and brokerage services provide custodial wallets. When you use these services to store your coins, you need to know that these services have control over your coins. When you get a non-custodial wallet, the third party does not have control over your wallet, and you have 100% control over the wallet because you get the private keys.
So, when you are storing your cryptocurrency with a third party service, you are not in 100% control of your cryptocurrency. There is a simple no-brainer slogan that helps you understand that if you do not have the private key to your cryptocurrencies, you do not own it.
So, before you choose your storage solution, you need to research into what you are signing up to. When there is a hack in the crypto exchange the difference you have to suffer will be very huge. There are other things like the blockchain splits taking place in the cryptocurrency. So, when you decide to choose a wallet, you need to decide between the available storage solutions to finally decide on whether it will be a safe solution for your requirements. You want to choose a wallet that you hold your precious assets safely and securely.
Fake cryptocurrency wallets are revolving around. Such wallets are created to steal the user information like the details of credit cards, mobile banking details etcetera. So, customers need to beware of fake wallets and phishing wallets.
Fake crypto wallets are created in a way to generate a public address and a private key. These are important if cryptocurrency should be transferred between wallets. However, the public address, in reality, belonged to the attacker. There was no private key provided for the user to access the funds. The investors deposited the funds thinking it is their public ID, but they were not able to withdraw the funds. The cybercriminal had the private key, and they used it to withdraw the money.
Being a computer code, the cryptocurrency is prone to hacks and accidental loss. Since cryptocurrency wallets do not come with a private key and they are managed by services, the risk of hacking is more in this method of storage. Therefore, cold storage and hot storage are considered to be the very commonly used methods to ensure that your cryptocurrency is stored carefully.