Cryptocurrency is gaining in popularity as investors get more used to it, but there are some fundamental differences when compared to national currencies. The most notable difference is that instead of being based on some item of value such as gold or the credit of the nation backing it, cryptocurrencies are based on the difficulty of producing them. Today’s crypto is based on complex algorithms, but that also means that they don’t have require anything beyond having an encryption key and a password.
This means that one of the strengths of cryptocurrency is that access to your funds is easy. But imagine losing your password to your crypto wallet, thus losing access to your funds. This happens far more often than you might think. According to Chris Brooks CEO and founder of Crypto Asset Recovery, a company which helps people regain their passwords, there are two types of digital wallets. The first is a self-custody wallets where “an individual holds their own private keys, and they are essentially protected through encryption and a password,” Brooks explained. The second are custodial wallets, where companies or organizations hold the private keys and the funds on behalf of the client.”
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