A hosted wallet is a type of cryptocurrency wallet that is hosted by a third-party service provider. This third-party provider can be either a private entity or an exchange. In a hosted wallet, the user’s private keys are stored securely with the provider and not revealed to the user or anyone else.
Because the keys remain hidden and encrypted, they are kept safe from online thieves. The primary benefit of using a hosted wallet is its convenience. Since all of the wallet-related tasks are handled by the third-party provider, users are spared the burden of having to set up their own wallets, which can be a complicated and time-consuming process.
The provider is also responsible for ensuring that the user’s funds are kept safe and secure. Also, many hosted wallets come with built-in features that allow users to easily buy, store, and sell their cryptocurrencies, as well as to transfer them to other people.
Some also offer competitive rates for cryptocurrency purchases and offer bonuses, discounts, and loyalty programs to their users. Finally, many cryptocurrency exchanges offer hosted wallets as part of their services. This allows users to hold their coins on the exchange’s platform, making it easy to buy and sell the coins without needing to transfer them around.
However, it is important to note that it may be risky to hold large amounts of coins on an exchange’s platform due to the risk of hacking.