How does Crypto Custody Work?
Crypto custody is the keeping and securing of cryptographic keys. Cryptographic keys provide access to your account, so you must keep them safe. There are two types of keys, public and private. The public key is an alphanumeric code that others can use to deposit funds. Private keys are only for personal use since they access your wallet through an encrypted code. You can think of your public key as your bank account number and your private key as the password.
There are two types of wallets where you can store your crypto. A warm or hot wallet is software-based and connected to the internet. It’s accessible and hard to lose, but it is more susceptible to cyber-attacks. Cold wallets are hardware-based, like a USB, safer to store and prevent cyberattacks, but there is no way to access your crypto if lost.
Most companies believe the safest way to store crypto is a combination of hardware and software. Hot wallets allow a day-to-day transaction with no delays, while cold wallets store significant funds.