How do cryptocurrencies work? How can you store them?

Cryptocurrencies run on a distributed public ledger called a blockchain, which is a record of all transactions updated and held by currency holders.

Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complex mathematical problems that produce coins. Users can also buy currency from brokers and then use crypto wallets to store and spend them.

If you own cryptocurrency, you don't own anything tangible. What you own is a key that allows you to move records or units of measurement from one person to another without a trusted third party.

Although Bitcoin has been around since 2009, applications for cryptocurrency and blockchain technology are still emerging in finance, and more uses are expected in the future. Transactions including bonds, stocks, and other financial assets may eventually be traded using the technology.

Once you've purchased cryptocurrency, you need to store it securely to protect against hacking or theft. Typically, cryptocurrency is stored in a crypto wallet, which is a physical device or online software used to securely store cryptocurrency private keys. Some exchanges offer wallet services that make it easy for you to store directly through the platform. However, not all exchanges or brokers will automatically provide you with wallet services.

There are different wallet providers to choose from. People use the terms "hot wallet" and "cold wallet":

Hot wallet storage: "Hot wallet" refers to cryptocurrency storage that uses online software to protect the private keys of your assets.

Cold wallet storage: Unlike hot wallets, cold wallets (also known as hardware wallets) rely on offline electronic devices to securely store your private keys.

Typically, cold wallets tend to charge fees, while hot wallets do not.