Cryptocurrency wallets are a safe place to store your digital assets, like coins; Bitcoin, WikiCatCoin, Defi Tiger Token, NFTs, winnings from Gamefi can be saved on a crypto wallet. A few of the most popular types of cryptocurrency wallets include hosted wallets, non-custodial wallets, as well as hard drive-based storage devices.
Depending on what you plan to do with your cryptocurrency and how much security you need, you may want to use one or the other. This guide will show you how to create a custodial and non-custodial wallet.
Crypto custody is the term used to describe the process of holding and managing your cryptocurrencies in a safe and accessible way. There are different types of crypto wallets that offer different levels of security, convenience and functionality.
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In the world of cryptocurrency, the safety of your funds is determined by the security of your secret key storage. People are always searching for trustworthy wallet solutions and thinking of how to store their private keys.
There are two keys associated with your cryptocurrency wallet: First is your Public Keys and the other — Private Key. The Public Key is similar to your email address, you can give your Public Key out to anyone safely for transactions and without fear of having your wallet compromised, and anyone can use your Public Key to transfer cryptocurrency to your wallet.
The main types of crypto wallets are:
Hot wallets: These are wallets that are connected to the internet and allow you to access your funds quickly and easily. They are usually software applications that run on your computer, smartphone or web browser.
Hot wallets are convenient for frequent transactions and trading, but they are also vulnerable to hacking, phishing and malware attacks. If your device is compromised or stolen, you may lose your funds or expose your private keys.
Cold wallets: These are wallets that are not connected to the internet and store your funds offline. They are usually hardware devices or paper wallets that generate and store your private keys in a secure environment. Cold wallets are more secure than hot wallets, as they are immune to online attacks and unauthorized access.
However, they are less convenient for frequent use, as they require physical access and manual operations. If you lose or damage your cold wallet, you may not be able to recover your funds.
Custodial wallets: These are wallets that are managed by a third-party service provider, such as an exchange or a broker. They hold your funds on your behalf and provide you with an interface to access them. Custodial wallets are convenient for beginners and users who do not want to deal with the technical aspects of crypto custody.
However, they also entail some risks, as you have to trust the service provider with your funds and private keys. If the service provider is hacked, goes bankrupt or acts maliciously, you may lose your funds or access to them.
Non-custodial wallets: These are wallets that give you full control over your funds and private keys, good example is a Ledger Nano. You are responsible for generating, storing and backing up your private keys, as well as for securing and maintaining your wallet. Non-custodial wallets are more suitable for advanced users and users who value privacy and autonomy.
However, they also require more technical knowledge and diligence, as you have to ensure the safety and functionality of your wallet. If you forget or lose your private keys, or if you make a mistake in using your wallet, you may lose your funds permanently.
As you can see, there is no one-size-fits-all solution for crypto custody. You have to weigh the pros and cons of each type of wallet and choose the one that best suits your needs and preferences. You may also use a combination of different types of wallets for different purposes, such as keeping some funds in a hot wallet for daily use and some funds in a cold wallet for long-term storage.
By following these tips, you can reduce the risks of losing your funds or compromising your privacy. Crypto custody is an important aspect of investing in cryptocurrencies, and you should take it seriously and responsibly.