Nowadays, cryptocurrencies are hot topic and a lot of new people want to delve into it. One of the most common questions of newbies is where cryptocurrencies are stored actually? Let’s try to answer this question.
Generally, cryptocurrencies aren’t assets that we keep in our wallet, but rather an information about the value which is assigned to the unique wallet identifier. This is similar to a bank account, where we don’t keep real coins or banknotes, but information about funds we have. This information is shared among all computers of the blockchain network and in reality, we don’t have any bytes which are cryptocurrency on our computers.
Crypto exchanges and private wallets
There are two types of wallets we can have. The first one is a private wallet created in the specific blockchain network, for example on the Ethereum network. Everyone can create private wallet (check also my guide about How to create MetaMask wallet?), send funds into it, and use them by confirming ownership with Private Key (which is saved and encrypted somewhere on our computer)
The second option is a wallet in the crypto exchange. Some CEX (Centralized Exchanges) creates a separate private wallet for us and some are using one blockchain wallet for a group of customers. In this case, we are confirming ownership by signing in by password to the certain exchange market. Some of the most popular centralized exchanges are Binance (https://www.binance.com), Coinbase (https://www.coinbase.com) or Kraken (https://www.kraken.com).
Hardware wallets are the same as private wallets, but the main difference between them is that instead of keeping our Private Key somewhere on our hard drive, we are keeping it on a physical device, not connected to the Internet. Two, the most popular hardware wallets are Ledger (https://www.ledger.com) and Trezor (https://trezor.io). This is the safest option to keep our crypto assets and I recommend using some hardware wallet instead of a software wallet, especially if you are buying crypto-assets long term.