Possibly the most important characteristics of cryptocurrencies are the ability to hold your crypto in your possession with no third-party exposure.
While a milestone in the adoption of cryptocurrencies, certain major mainstream financial institutions now offer the service to store your cryptocurrency.
This is known as offering custodial services. While a plus in bringing cryptos to the mainstream it does take away one of the major advantages of crypto .
HODL- Hold on for dear life, is an acronym popular in the crypto market. It goes along with the slogan,. If you don't hold it you don't own it!
Technically, hacking a blockchain is next to impossible in part due to its military-grade sha256 encryption.
But, exchange and banks can be hacked putting your cryptos in peril.
The best practice is to store your cryptos where only you can access them. by using a crypto wallet.
NEVER leave your cryptos off-site!
Cold storage refers to bitcoins kept offline. You could compare this principle to banks moving customer funds into a vault rather than keeping it at the bank teller desk. In the case of bitcoin cold storage, though, there are other layers of security in place. Examples of cold storage include bitcoins kept on a USB drive or a dedicated hardware wallet.
A paper wallet is the name given to an obsolete and unsafe method of storing bitcoin which was popular between 2011 and 2016. It works by having a single private key and bitcoin address, usually generated by a website, being printed out onto paper.
This method has a large number of downsides and should not be used.
For storage of bitcoins, a much better way accomplish what paper wallets do is to use seed phrases instead, where the user writes down 12 or 24 random words generated by their wallet.
Hot wallet refers to the method by which every bitcoin exchange keeps certain liquidity just in case there is a massive influx of withdrawal requests. You may think of this liquidity as similar to the cash reserve that any bank must hold so that customers can access their funds at any point in time. This hot wallet provides liquidity of digital currency at all times. Unlike cold storage, a hot wallet is a bitcoin wallet connected to the Internet 24/7.
Paper wallets have their weaknesses and should be used with minimal cryptos involved. They, none the less serve to give you a better understanding of blockchains and cryptos in general.
I encourage you to set some up and send and receive cryptos from other crypto enthusiasts.