TYPES OF CRYPTO WALLETS - PART II: 𝘊𝘌𝘕𝘛𝘙𝘈𝘓𝘐𝘡𝘌𝘋 𝘷𝘴 𝘋𝘌𝘊𝘌𝘕𝘛𝘙𝘈𝘓𝘐𝘡𝘌𝘋?
- A type of hot wallet provided by centralized organizations, eg centralized exchanges. Users will be provided with a hot wallet when opening an account on exchanges like Binance, Coinbase, etc.
- Its advantages & disadvantages are similar as those of hot wallets, but there is an added risk: exchanges are capable of taking full control of users’ assets. Therefore, if you choose an exchange that is not reputable or has poor security that is vulnerable to attacks, users are at risk of losing their personal assets.
- Users can directly use this wallet to start using services on the exchange, such as trading, staking or farming, etc. Transaction fees will be calculated depending on the regulations of each exchange.
- With this type of wallet, users can take full control regarding creating & managing their own wallet. No 3rd party has access to a decentralized wallet without the wallet's security information (e.g. seed phrase and private key).
- Easy to use by installing apps such as Trust Wallet, MetaMask, Phantom, Sollet, etc.
- After installing and creating a wallet, there are 3 things to care about: Wallet address, Private key & Paraphrase.
Address: User's wallet address, used to receive or send cryptocurrency.
Private Key: Used to open the wallet.
Paraphrase: Used to unlock or recover a wallet, similar to a private key. Users can unlock, make transactions or do any task the wallet provides with just private key & paraphrase.
- Private key & Paraphrase should be stored carefully in a safe place. Do NOT share these 2 information with anyone.
- On devices that use and store e-wallets, DO NOT install pirated software or click on random links or attachments sent anonymously by others on the Internet.
- If possible, users should have a separate computer & phone only for Crypto transactions.
- Limit the use of centralized wallets on unreputable/small exchanges (these can be hacked or stopped working, leading to loss of assets).
Published on January 13, 2022
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