Hosted Wallet

A wallet managed by a third-party service.

What Is a Hosted Wallet?

A hosted wallet is like a bank account for your cryptocurrency. Just like how your dollars are stored in your bank’s computer systems, your crypto is stored and managed by a third-party provider such as a centralized exchange. 
Hosted wallets are popular places to store cryptocurrency. The providers build secure online platforms to custody your crypto funds. All you need is an account and password to access your coins through their website or app. Much easier than dealing with cryptographic keys and cold storage! But don’t get too complacent – security is never perfect. You have to trust the provider to keep your crypto safe. And as the saying goes, “Not your keys, not your crypto.”

What Is a Self-Hosted Wallet? 

A self-hosted wallet is when you control the private keys to your cryptocurrency. It’s like storing cash under your mattress – the security is totally in your hands. 

Self-hosted wallets give you full control, but also full responsibility. Lose your private keys and kiss your crypto goodbye. And getting hacked is a constant risk you have to mitigate. Many crypto enthusiasts prefer self-hosted wallets for the control.

Simply put, a hosted wallet is an online service that handles all the complex blockchain transactions and security protocols behind the scenes so you don’t have to. Just log in with a username and password to send or receive coins. Much less hassle than running your own wallet, but you have to trust that third party with your precious crypto stash. Do your due diligence before picking a hosted wallet provider!

Are Hosted Wallets Safe?

Reputable hosted wallets invest heavily in security measures like encryption, cold storage and insurance to protect your funds. Billions in crypto assets have already been handled by providers without major incidents. But safety isn’t guaranteed. Hosted wallets are still susceptible to hacking, internal theft and bankruptcy. Ultimately, you have to weigh the conveniences of a hosted solution against the risks of giving up total control over your private keys. It’s about finding the right balance for your needs and risk tolerance. A healthy skepticism is warranted.

Pros of Hosted Wallets

Letting hosted wallets store makes life so much easier! Storing coins on centralized exchanges gives you a simple way to buy, sell and send your crypto without all the technical hassle. A few clicks and your Bitcoin is on the move. 

Hosted wallets provide a smooth user experience with the security infrastructure built in. But convenience comes at a cost. By relying on a hosted provider, you cede control over your private keys and trust them to custody your assets responsibly. Make sure you vet any hosted wallet before pouring your hard-earned crypto into their platform. Convenience is great until you get hacked!

The Cons of Hosted Wallets

Having a hosted wallet without rock-solid security is like wearing a suit of armor made of paper. All it takes is one hack or inside job and poof – your precious crypto could vanish! Reputable hosted wallets invest millions to secure their infrastructure, but risks remain. And if they go bankrupt or close up shop, access to your funds could be lost. The convenience of an online crypto wallet comes at the cost of having full control over your assets. You have to cross your fingers and hope their security measures hold up. Maybe keep some coins offline in cold storage for added peace of mind.

Choosing a Hosted Wallet Provider  

The top hosted crypto wallets share features that elevate both security and user experience. Look for robust encryption protocols, offline cold storage, and insurance to protect your assets. Multifactor authentication, biometrics logins, and activity notifications also boost safety. On the convenience side, search for smooth mobile apps, reasonable fees, and integration with banks for easy on/off ramping of fiat currency. Robust self-help options and knowledgeable customer service provide peace of mind. The best platforms invest heavily in both safeguarding and optimizing the experience of storing your cryptocurrency. Don’t compromise on either front.

How To Cryptocurrency in a Hosted Wallet

How To Add Crypto to a Hosted Wallet 

Adding cryptocurrency to your shiny new hosted wallet is a breeze. First, sign up and verify your account with the provider. Fund your wallet by purchasing crypto directly on their platform or transferring from an external wallet. Use the deposit function and copy the destination address for whatever asset you want to add. Double-check the details and initiate the blockchain transaction from your other wallet. In minutes, your crypto should arrive safely in your hosted wallet. 

How To Manage Crypto Assets in a Hosted Wallet

A key perk of using a hosted wallet is the ability to easily manage your crypto assets in one place. Quality providers allow you to buy, sell, trade, earn interest and spend your coins from a simple user portal. Keep tabs on balances across different cryptocurrencies and track your portfolio performance over time. You may use built-in trading tools to execute buys and sells at optimal prices. 

Some platforms even let you earn yields on stored assets through lending and staking programs. Just remember that convenience comes with risks. Do your own research before picking a hosted wallet provider.

How To Withdraw Crypto From a Hosted Wallet

Withdrawing your cryptocurrency from a hosted wallet follows a similar process as depositing, but in reverse. Log into your account and initiate a withdrawal to an external address. Enter the destination wallet details carefully to avoid any costly mistakes. Don’t forget to account for withdrawal fees which can really dig into your asset value. Processing times vary, so allow a few hours for the blockchain transaction to fully complete before expecting the funds to arrive in your personal wallet. And be sure to verify the withdrawal before considering that crypto is totally out of the hosted provider’s hands.

How To Secure Your Hosted Wallet

Setting up 2FA on a Hosted Wallet

Securing your hosted crypto wallet should be priority #1. Start by enabling two-factor authentication through apps like Google Authenticator. This adds an extra login step, requiring both your password and rotating code from the 2FA app. Hackers can’t access your account with just a stolen password! Also, beware of phishing scams via email and SMS – legit providers will never ask for your login details or 2FA code. 

Enabling login notifications can also alert you to any suspicious activity. Turning on all account security features takes just minutes and drastically lowers the risk of your hosted wallet getting compromised by criminals.

Safely Backing up Your Hosted Wallet 

Here’s an important tip – be sure to safely back up your hosted crypto wallet in case disaster strikes! Most providers and two-step verification systems give you a recovery phrase when you open your account – copy this down and store it offline in a secure place. Without it, you could lose access forever if you forget your password or lose your device.