If you are approaching the world of cryptocurrency for the first time, you can choose the simplest system to create and store your private key and public address by relying on an exchange.
What is an Exchange and which are the most popular ones?
Exchanges are online platforms where you can buy, sell, transfer and store cryptocurrencies.
They are a convenient solution because they store your private key and your cryptocurrencies for you, and you can easily access them whenever you want to buy or sell.
There are a lot of exchanges, for example:
- Young Platform
Surely, the greater the degree of autonomy with which you manage your investments in crypto, the less likely you are to risk theft or fraud.
This is due to the fact that exchanges are centralised platforms, i.e. companies that offer services kind of like a bank and store all the data on a central server.
Like any centralised entity, exchanges also run greater risks, having only one point of failure.
Where to store your Cryptocurrencies
To choose how to generate your private and public keys and store your cryptocurrencies, you should understand how to use the different tools at your disposal.
An exchange is just like the wallet you have in your pocket.
You have the right amount of liquidity at your fingertips to make everyday purchases, and it allows you to buy and sell quickly depending on market trends.
A hardware wallet or a paper wallet, i.e. offline custody systems, represent the equivalent of your bank account, where you keep most of your cryptocurrencies, away from possible hacker attacks.
Finally, if you are an institution or an investor with large capital, institutional custody ensures a security service equal to that of a bank.
Differences between Custody Solutions
- Autonomous Custody: you use about 3 sites, one to create the keys, one to create the wallet and make transactions and finally a platform that allows you to buy and sell cryptocurrencies.
- Partial Custody: you create an account on an exchange platform, which holds your private key and holds your cryptocurrencies. With the exchange, you also have a wallet and public address. All on one online platform. You can always decide to transfer your cryptocurrency offline by sending it to another private key that you create yourself.
- Full Third-Party Custody: this is designed for large investors and institutional bodies that have to manage large amounts of cryptocurrencies. The service of creation and custody of keys is regulated by real contracts, and the funds are managed entirely offline, with security measures comparable to those of a bank.