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Amid much fanfare and anticipation CloudTech Group has finally come out with a release date for their highly touted CloudTechX Wallet.It is set to officially launch sometime in mid-September; the date will be confirmed as soon as all final tests are successfully run.

This entity was brought to life due to a lack of a real solution in the present Australian market for a secure storage of cryptocurrency funds which also enables swift withdrawals of holdings into AUD. At launch, CloudTechX wallet will offer multi-asset support for funds in the form of Bitcoin, Ethereum, Tether and Australian dollars- with more crypto currencies being onboarded later on.

Setting up a wallet is as streamlined as its user interface; download the app from the operating system of choice; available on both theApple App store and Google play store, create an account on it and add a government issued ID for KYC (know your customer) verification. Once verified, transfer over any crypto holdings, link a bank account and withdraw any of the holdings into AUD. Users engaging in the withdrawal service will receive realtime exchange rates of the specific crypto along with a flat 0.1% transaction fee. Another security feature is the enabling of a third-party coin tracking service which traces the transfer of funds from one account to the other and helps reduce the prevalence of illicit sources of funds.

CloudTechX wallet are officially licensed custodians of funds and the fact that the wallet exists off-chain ensures complete security for user data and especially user funds. Additionally,CloudTechX is a registered Digital Currency Exchange (DCE) with AUSTRAC which allows for the primary function of exchanging crypto to fiat and fiat to crypto.

A preview of the interface and supported cryptocurrencies.

Why knowing your crypto wallets can keep you out of trouble.

When the cryptocurrency exchange FTX filed for bankruptcy the reaction from the crypto community was a mixture of anger, confusion, and sadly, resignation. 2022 and 2023 saw a number of prominent companies collapse through lies and mismanagement; it’s understandable, then, that many in the community have frayed hope over the long-term — nevermind the short-term — health of the industry.

In the immediate wake of the FTX collapse, many exchanges rushed to implement measures such as proof of reserves in an attempt to assure users that what they were doing was transparent and legitimate. Again, the reaction has been mixed.

If there is a silver lining — and we use the phrase loosely — from this mess, it’s the reminder that anyone investing in the crypto market must, above all things, practice self-custody. And the way to best practice self-custody is by knowing and understanding what cryptocurrency wallets are. Here is a simple guide to help you better understand what cryptocurrency wallets are and which ones are best-suited to your investment needs.

What is a cryptocurrency wallet?

Put simply, a cryptocurrency wallet, or crypto wallet for short, is a piece of software or hardware that lets you store and use cryptocurrencies. The name itself, it must be noted, is a little misleading. Rather than store your actual crypto (which is impossible, as cryptocurrencies exist solely on the blockchain), a crypto wallet stores the passkeys that grant you access to your crypto and allow you to make transactions.

There are two types of passkey that you need to store and trade crypto: a public key and a private key. The public key is the wallet’s address. If another user wants to send you crypto they must know your public key. The private key, meanwhile, is the wallet’s password. You need your private key to both unlock your crypto and verify transactions. Certain crypto wallets require a third element, a ‘seed phrase’. Your seed phrase is your recovery password; in essence, your master key. It’s crucial to note that if you lose or forget your seed phrase there is no way to recover it.

An easy way to understand how crypto wallets and their keys work is to imagine the wall at your local post office that holds all the private PO boxes. To the public, or in this case, crypto users, all the boxes are visible, just as wallets are visible on the blockchain. Your public key is the number on the front of your post box. And just as someone can deliver a letter to you by knowing your post box number and placing the letter in that box, if a user knows your public key they can transfer crypto to your wallet.

Your private key, in this example, is the key that unlocks your post box. Without a private key, neither you nor anyone else can access your crypto, the same way you need a key to open your post box and access your mail.

An easy way to understand crypto wallets is to imagine PO boxes at a post office.

Types of crypto wallets.

Just as there are two types of passkeys, there are two types of crypto wallet: a hot wallet and a cold wallet. The difference between the two is equally simple: a hot wallet is always online, whereas a cold wallet is almost always offline (more on that later).

Hot wallets.

A hot wallet is a piece of software that stores both your public and private key online. You can access your hot wallet through any device — be it smartphone, tablet, or computer — as long as it’s connected to the internet. Aside from the convenience that hot wallets offer, they’re also a good entry-wallet for users new to crypto, as they’re usually both free to download and possess a user-friendly interface. However, because hot wallets are always connected to the internet, they are susceptible to different types of online attacks, such as hacks, phishing, and other scams.

Hot wallets fall into two categories: custodial and non-custodial. Custodial hot wallets, otherwise known as exchange-based wallets, are wallets that exist within a centralised crypto exchange, such as Binance. These wallets require you to open an account, which means you do not have total custody of the crypto you hold on that exchange. In the event that the exchange encounters financial problems they have the ability to freeze your account, just like a traditional bank. The flipside to having joint-custody of your wallet, though, is that if you lose your keys the exchange can recover them.

Non-custodial hot wallets, on the other hand, do not exist within a central exchange. MetaMask is a popular example of a non-custodial wallet. Therefore, the benefits and risks are basically the opposite of custodial hot wallets. On the one hand, you will have total control of your crypto and won’t be susceptible to external financial problems; on the other hand, you will still be susceptible to online attacks, and if you lose your keys you will need your seed phrase to recover your account.

Cold wallet.

A cold wallet is a piece of hardware that stores your passkeys offline. Cold wallets typically resemble a USB stick or external hard drive. These wallets are the most secure wallets for protecting your crypto, because even when your wallet is connected to the internet your passkeys are held inside a chip that never connects to the internet. This added security comes at the expense of convenience, as unless you plan to carry your cold wallet with you at all times you won’t be able to access your crypto whenever you want or need.

And while you don’t need to worry about someone hacking your cold wallet, unless they get a hold of your private key or seed phrase, as with a non-custodial hot wallet, you do need to take care not to lose or forget your passkeys and seed phrase as you won’t be able to recover them. Also, given that a cold wallet is a physical item, it can be lost the same way any physical item can be lost, and in the event that this occurs no amount of technical expertise will help you find it.

Cold wallets have seen a spike in popularity since consumer confidence in exchange wallets plummeted. Taking advantage of this swing in sentiment are cold wallet manufacturers such as Ledger.

Which crypto wallet should I use?

Deciding which crypto wallet is the best one for you to use will depend largely on your investment habits. However, there are a number of things to consider when choosing a crypto wallet. How secure the wallet is, how convenient it is to use, what additional fees you are liable for, what insurance it offers and what coins it supports are all things you must take into account if you are to find the wallet best-suited to your needs.

In the end, you might find that no one wallet will satisfy all your investment needs. Which is fine. Given the well-documented volatility of the crypto market — something that is unlikely to change anytime soon — there is nothing wrong with having more than one place to store your crypto. If you do your due diligence, you’ll be able to find the crypto wallet that works best for you.

Disclaimer: This article is meant as a brief guide and nothing more. As with any investment undertaking, you must do your own research.