Which wallet to start depends on the type of exchange on which the asset owner trades. As you know, exchanges are centralized and not. Centralized ones often provide custodial ones. That is, they store the key in their database since, as I said above, they act as a depository for their clients ‘ funds. This means that you need the maximum level of protection. Decentralized-just the same, they provide software that is constantly online.
How a hot wallet works on a crypto exchange is created when the user has registered and made a deposit. This is not only the practice of top platforms, such as Binance, WhiteBit, Huobi, or Coinbase but also familiar, since the mobility of funds is vital for traders. However, it is the constant work with the Network that makes them open to technical vulnerabilities and hacker attacks.
How a cold wallet works: this way of storing cryptocurrency is more secure. The device stores keys, public and private. They are not connected to the Network, so it is almost impossible to hack them.
The golden rule of centralized ones, such as the Binance mentioned above and WhiteBit, stores user funds on cold wallets. The key here is that centralized, unlike decentralized, platforms are custodians. That is, they act as a depository for their clients ‘ funds.
In non-custodial wallets, proof of ownership of assets is provable using a unique alphanumeric key. In custodial tickets, the custodian of this key is a third party, that is, the cryptocurrency exchange itself.
