Keeping your finances in the form of cryptocurrency gives you a great deal of independence from external factors. Do not forget that owning cryptocurrency requires maximum responsibility.
First, you need to understand what it means to own cryptocurrency and how it works. To enjoy all the benefits of cryptocurrencies, you are provided with keys to receive and confirm transactions.
To get money transferred, you have to share your cryptocurrency wallet address. With your private key, you authorize the transfer of funds from your wallet.
A cryptocurrency wallet stores your finances. There are several types of wallets: “hot” and “cold”
“Cold crypto wallet”
A “cold cryptocurrency wallet” stores your “keys” and verifies transactions. For a “cold wallet”, the Internet is required only when making a transfer. Many users consider “cold crypto wallets” to be more secure.
“Hot crypto wallet”
Using a “hot crypto wallet” requires an Internet connection.. For example, let’s take those cryptocurrency wallets where your keys are controlled by a third party, namely the provider (for example, Binance or Coinbace). This type of wallet is also called custodial. Undoubtedly, these wallets are more convenient to use than regular cold wallets, but they also have their drawbacks. The disadvantages include the insecurity of your finances from hacker attacks and the poor attitude of the exchange to its users. To minimize the risks, there are non-custodial wallets that are software or browser-based and can be installed on your personal devices. The main advantage of such wallets is that you keep the keys to them.
What are the advantages and disadvantages of self-control of virtual finance?
The advantages immediately include full control over your financial transactions, you choose how much and what to spend money on without restrictions from the exchange, and this also gives you another advantage, namely, you get more financial privacy than when working through the exchange. It is also worth mentioning that self-storage of your cryptocurrency “keys” minimizes the risk of losing money due to hacker attacks against the exchange, its bankruptcy, or simply irresponsible attitude to the finances of its users.
What are the disadvantages of self-control of your cryptocurrency finances?
Despite all the advantages of self-control, it is necessary to mention its disadvantages. If someone else gains physical access to your cold wallet with your passwords, they will be able to spend money from it without your knowledge. You should also not forget about the risk of losing passwords that are required to authorize and use the wallet.
Owning a cryptocurrency wallet opens up new opportunities and risks for you, so you need to be responsible and self-controlled.
