How to Choose a Wallet For Storing Crypto Assets

Interestingly, in 2022 the number of crypto wallet users exceeded 84 million people. If you want to support the trend of getting to know cryptocurrency, it is important to choose the right crypto wallet. First of all, crypto wallets are distinguished by the principle of asset management. There are centralized and decentralized crypto wallets. The first ones are suitable for beginners and users who store small amounts of money. The latter is intended for professionals: people ready to take full responsibility for their own assets.

Centralized Crypto Wallets

These are programs that are owned and operated by third parties. They have full access to the user's crypto assets, as well as full control over them. The most understandable analogy is a bank deposit: while clients’ money is kept in the bank, it is the bank that manages it.

Therefore, users of centralized crypto wallets:

• may lose funds due to stock market failure and other external reasons;
• risk losing control over assets due to violation of rules and blocking;
• transfer data about themselves and transactions to third parties (since most services are forced to collect it due to standards requirements).

In general, this operating principle is contrary to the laws of blockchain. But it is not all that bad. Full control over assets, of course, provides many benefits, but inexperienced users are at great risk. Therefore, it is better to start exploring the crypto market with a centralized wallet.

Decentralized Wallets

This type of cryptocurrency wallet gives the right to sole disposal of assets because it implements the secure storage of private keys with the owner. It should be noted that this does not guarantee complete anonymity, but it allows you to remove a third party from the cryptocurrency management process. Such wallets usually interact with decentralized exchanges (DEX) and applications (DApp). Among the decentralized exchanges, Uniswap can be noted. Users can subsequently convert the cryptocurrency stored on crypto wallets into USD or EUR and make regular transactions, such as purchasing groceries, an Aetna insurance policy, a car, or any other purchases.

Crypto Wallets - a Type of Key Storage

The type of key storage for crypto wallets is important since there is a risk of this data being used by attackers, which will lead to the theft of funds.

Custodial Crypto Wallets

These are cryptocurrency wallets that involve storing private keys with a third party (most often the exchange or platform where you buy cryptocurrency). Thus, they have complete control over the assets and can interfere with them at any time (for example, block them). Custodial wallets are centralized by type of management.

It would seem that this option for storing crypto assets is unacceptable because it violates the principles of anonymity and lack of centralized control accepted in the crypto community. However, custodial wallets are the most suitable option for beginners. Their use is as secure as the usual Visa system for everyday payments.

Non-custodial Wallets

These are different crypto wallets (hardware, software) that do not store private keys. In this case, the keys can be located in the browser, the memory of a smartphone or computer, or on a special device. Their storage is the responsibility of the owner. Typically, such options are chosen by people with experience: investors with large capital or active traders.

With such crypto wallets, all responsibility lies with the user. Losing a private key is equivalent to losing access to assets (except when access can be restored using a seed phrase). Therefore, it is better for the owner to store at least two copies of the private key and phrase and take care of their reliable protection.

Crypto Wallets - Internet Connection

This is one of the important options for classifying crypto wallets. It is worth paying attention to it because the security of crypto funds depends on it.

Hot Crypto Wallets

These are crypto wallets that are constantly connected to the Internet. To use any of them, registration is almost always required, along with the transfer of personal and contact information.

The owner of a hot crypto wallet can work with cryptocurrencies, including withdrawing assets to the card from any place where there is Internet access. Fast connection increases the comfort of use. This is the best solution for users who actively conduct transactions with digital assets. However, such wallets are often subject to hacker attacks.

Cold Crypto Wallets

These are systems or devices in which conditions have been created for the autonomous holding of cryptocurrency. They do not have a permanent internet connection. They are usually in the form of hardware devices. Therefore, remote hacker attacks and theft of crypto assets are excluded, and storing the device in a safe or other safe place eliminates physical risks.

But even the loss of a cold crypto wallet is not a problem. Most hardware models provide the principle of updating access using a seed phrase.

Final Thoughts

There are many solutions on the market for storing cryptocurrency, and it’s up to you to decide how to manage your funds: independently or with the involvement of third parties, through a mobile client or a special device, with standard or enhanced security features. In fact, it is as easy as working with dollars or euros. If your activity involves working with both fiat currencies and cryptocurrency, we recommend using the Rates service, which allows you to track currency exchange rates in Ukrainian financial institutions. The service is available to users around the clock from anywhere in the world - noisy Las Vegas or peaceful Bali.