As crypto ownership becomes more and more common, holders will need to think about how they protect and hold their assets. The safest option is storing cryptocurrency in a personal wallet. Crypto wallets are programs that allow users to store, send and receive cryptocurrency. Each wallet has a private key that allows the wallet to be spent. Private keys are cryptographic strings of code that allow owners to spend the funds inside a wallet, as well as prove ownership. Wallet information is also stored offline, reducing the risk of a hacking attempt. Everyday non-technical crypto users can benefit from the increased security, but it may come at the cost of convenience, depending on their needs. A custodial wallet is a kind of online cryptocurrency wallet that a third party manages, such as an exchange, after users make their first cryptocurrency purchase. In other words, the exchange is the custodian, responsible for safely holding the user’s cash and keeping track of the keys. The bulk of client money is housed in cold storage hardware wallets at major United States crypto exchanges. A custodial wallet is less secure than a noncustodial wallet. Yet, many people still choose them since they are easier to use and involve less responsibility. If users forget their password for their exchange account, they can probably reset it through established identity verification processes.
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