Do I need a decentralized wallet is a question that many are asking? What is the difference between a “centralized Wallet” and a decentralized wallet? The real question is “Who has control over my wallet’s money? Looking at the chart below, many of these types of questions can be answered.
One can see from the list above that decentralized wallets are under your control. You have the keys and it is your bank. No one can freeze your assets, however, it is recommended that you not leave large amounts inside a decentralized wallet that can be lost by the website closing down. So being careful to know where your money is at all times.
The biggest factor you should consider when choosing a crypto wallet is how you intend to use your crypto. If you are planning on buying and holding your investment for the long term, a hardware wallet is likely your best choice. Crypto wallets come in many forms, including web, mobile, desktop, paper, and hardware wallets.
Hardware wallets are those like the following. You have them in your hand and load your crypto on the drive. They may also come as paper wallets. A paper wallet is a printed piece of paper that contains keys and QR codes that are used to facilitate cryptocurrency transactions. Because they are removed from the Internet, at one point paper wallets were considered to be more secure than other forms of cryptocurrency storage. However, Paper wallets are easy to lose track of and therefore this author recommends a hardware wallet for security.
Best Hardware Wallets:
- Hardware: Ledger Nano S
- Hardware: Trezor One
- Hardware: KeepKey
- Hardware: Trezor Model T
- Hardware: BitBox02 by Shift Crypto
A solid strategy to manage risk is to limit the number of funds that can be accessed through less secure platforms, such as exchanges while keeping the bulk of your funds in a more secure wallet somewhere offline as inside a hardware wallet which can be accessed by plugging the drive into a computer and moving the crypto to an exchange to pay for buying another Crypto coin or token or placing it into an exchange to use for other transactions. You totally control the flow of your money (Cryptocurrency) You might even choose to have several wallets to limit risk. Hardware wallets are considered the most secure type of wallet. It is the best choice if you invest large amounts at a time and don’t plan to trade regularly.
A decentralized wallet means that only you hold the keys to your crypto wallet. A decentralized wallet doesn’t guarantee complete anonymity, however. It simply means you don’t rely on a 3rd party to send, receive or store your cryptocurrency, mitigating some security risks associated with hosted wallets.
You may also find software wallets like Coinbase.com, Gemini.com, or Blockfi.com. In Blockfi you can park Crypto and earn interest on the coins you deposit. These are centralized wallets and can be controlled by outside entities like governments and companies or scrupulous persons. These wallets in many cases have to report profits, sales, and purchases to governmental agencies to allow for tax information to be transmitted or are subject to other governmental or company controls. Coinbase is a popular exchange and wallet where one can buy, sell, and trade cryptocurrency as well as uses their ProCoinbase exchange as a place to trade crypto. But as a centralized wallet, the government sees what you are doing in both the exchange as well as the software wallet.
No matter the type of wallet you chose, they all serve the same function. However, depending on what you plan to use your cryptocurrency for, some wallets work better than others. A solid strategy to manage risk is to limit the number of funds that can be accessed through less secure platforms. Keep the bulk of your funds in a more secure wallet somewhere offline. You might even choose to have several wallets to limit risk.