- Exchange Account
The easiest place to store and manage crypto funds is probably the exchange account. Most crypto exchanges (with the exception of DEXs) maintain wallets into which your funds are sent whenever you execute a trade. From the user's perspective, this kind of custody differs little from using traditional Fintech, like PayPal, Wise, or even your online bank account. You log in using a username, password, and two-factor authentication (2FA) then are able to buy, sell, and trade assets with ease.
The main advantage of crypto exchange storage is that assets are quick to access. For businesses, exchange custody is likely the best option when planning for expenses that will need to be dealt with in the short-term. While long-term investment positions should probably be moved to a self-custody solution, corporate exchange accounts can be configured to give various employees different levels of access to funds and require transaction approval from particular stakeholders in a firm.
Hot storage may be a preferable location for some businesses to store transactional instruments, like stablecoins. Since the value of these tokens does not change, they are usually acquired for specific purposes and are generally only held for a short time. Investment assets that accrue interest in the long term are usually better sent off to other forms of custody.Pros:
- Rapid access to funds
- Multi-platform (web browsers, mobile, PC)
Warm Storage — Cloud Wallets
- Exchange can get hacked or shut down
- Chance of user error (forgotten passwords, etc)
- Threat of malware
Cloud wallets are basically the crypto equivalent of your Apple or Google Pay account. A quick-to-use software-based solution, this form of third-party storage is intended for short-term crypto custody and transactional use cases.
For businesses, owing to its ease of use and quick setup, the cloud wallet can serve as a daily driver. For instance, a company can set up several cloud wallets in order to serve different roles. The wallets can be assigned to individual project teams in order to finance specific tasks. In this way, the cloud wallet serves as a kind of "business debit card," only for crypto. Pros:
- Rapid, multi-platform, access to funds
- Quick setup
Cool Storage - Software Wallets
- Risk of server failure
- Malware threats
If you intend to hold your crypto assets long-term, we strongly encourage you to create a software wallet. A software wallet is an application that you can install on your a PC, smartphone, or any other computing device that stores your private keys. Most popular software wallets today also feature UIs that facilitate easy crypto wealth management.
The primary advantage of this kind of 'cool' storage over cloud-based wallets and exchange storage is that your funds remain under your control at all times. However, your device can be infected by malware which can give malicious actors access to your keys. Software wallet owners should be certain to store wallet backups in a secure location.
- Free, quick, setup
- User is always in control.
- Malware risk
- User must be sure to make and maintain backups.
- Hardware Wallets
To investors and businesses that plan to hold larger amounts of cryptocurrency, we always recommend the purchase of a hardware wallet. These are physical devices which resemble small external hard drives or USB sticks. Hardware wallets on their own are rather inexpensive - ranging from about 75 to 150 pounds - and their purchase represents a significant amount of security for one flat fee.
We find newer generations of the wallets to be extremely beginner friendly as they feature digital touchscreen displays and streamlined user experiences. The devices are protected by advanced cryptography and are safe to use even when connected via USB with a malware-infected computer.
To larger enterprises, we usually recommend our business clients to set up multiple hardware wallets and to store backups with verified and trustworthy physical vault providers. We also encourage such clients to consider setting up multi-signature protocols that govern access to funds.Pros:
- Industry-grade cryptography
- Fully offline storage (eliminates malware risk)
- Easy to store and back up
- Excellent user experience (digital displays)
- Requires some initial investment
- Cannot be used on-the-go (USB input required)
- Must wait for the arrival of the device to set up wallet