Crypto beginners, can we have a little and simple thread explaining the various types of wallets?
Okay, here we go. Please bear in mind I’m not an expert but want to share the little knowledge I’ve accrued so far in my crypto journey.
Before we start, know that there are different classification of wallets but I’ll go with the most practical ones.
Before we start, know that there are different classification of wallets but I’ll go with the most practical ones.
Crypto wallets are like digital wallets where you can store your coins. It’s that simple. They can be divided into two major categories: A) Custodial and Non Custodial Wallets and B) Hot and Cold Wallets.
As i said, there are other classifications but let’s stick with these two.
As i said, there are other classifications but let’s stick with these two.
Custodial wallets as the name implies, means someone is holding your coins for you. Most exchange platforms like Binance and Luno make use of custodial wallets.
In Non custodial wallets, you alone have access to your coins and you would need your “private keys” to access it.
In Non custodial wallets, you alone have access to your coins and you would need your “private keys” to access it.
Examples of Non custodial wallets are Blockchain, Coinbase and all “cold wallets”.
Which brings me to the concept of Hot and Cold wallets.
Hot wallets are wallets connected to the internet while Cold wallets aren’t connected to the internet and mostly in kept in hard drives.
Which brings me to the concept of Hot and Cold wallets.
Hot wallets are wallets connected to the internet while Cold wallets aren’t connected to the internet and mostly in kept in hard drives.
Now let’s quickly go over the pros and cons of Custodial and Non Custodial wallets.
Custodial Wallet pros: 1) Easy & quick access and good when you’re trading actively.
2) In the event you forget your password, you can do an email-password reset and regain access to your coins.
Custodial Wallet pros: 1) Easy & quick access and good when you’re trading actively.
2) In the event you forget your password, you can do an email-password reset and regain access to your coins.
Custodial Wallets Cons: 1) There’s the possibility the platform gets hacked and all your coins go bye bye.
Non Custodial Wallets Pros: 1) Much more secure than custodial wallets as you alone can access it...with cold wallets the most secure.
Non Custodial Wallets Pros: 1) Much more secure than custodial wallets as you alone can access it...with cold wallets the most secure.
2) Very useful when you want to hold (HODL) your coins for long term.
Non Custodial Wallets cons:
1) Can be stressful if you plan on active trading with the coins...you’d have to transfer it to an exchange platform.
2) If you lose or forget your private keys, that’s the end.
Non Custodial Wallets cons:
1) Can be stressful if you plan on active trading with the coins...you’d have to transfer it to an exchange platform.
2) If you lose or forget your private keys, that’s the end.
Okay, that’s it for now (until I remember any other thing to add).
Hope this helps.
Hope this helps.
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