Previously, we have introduced what encryption hosting is. Encryption hosting is a term used to describe the process of maintaining assets against theft. A custodian is generally a third party employed to manage cryptocurrency for you. It can be used as a guarantee for your capital, whether it is cash, securities, gold or virtual assets. Therefore, some novice investors ask, how does crypto hosting work? What are the types of encryption hosting? Next, let's have a look.
How does Secure Hosting work?
Although each custodian has different exact steps, generally speaking, investors register with the cryptocurrency custodian, carry out AML/KYC inspection, and then send their digital assets to the wallet operated by the custodian.
Cryptocurrency custodians store their customers' digital assets in multi signature cold storage wallets to ensure maximum property security.
One example of leading cryptocustodians is coin vault custody. The enterprise is independent of its parent company, Coinbase Inc Operation is the trustee of the New York State Banking Law and also a qualified custodian. This means that it is subject to adequate controls to provide monitoring services.
Coinbase escrow deposits customers' funds in the "special chain addresses guaranteed by Coinbase's war tested refrigerators". These addresses are insured and regularly approved to provide the most advanced encrypted escrow. In addition, Coinbase Custody also allows betting on shares held on behalf of customers to prove assets.
Other leading cryptocurrency custodians include BitGo, Gemini, itBit and KingdomTrust.
Fees for encryption hosting
If you choose third-party hosting, as with any type of service, the provider will generally deduct a certain amount of expenses to deposit your funds. Moving cryptocurrencies into and out of your account will also incur costs. These costs generally fall into one of the following three categories.
Custody fee: The custodian stipulates a certain percentage based on the value of the assets under custody every year, generally less than 1%.
Setting fee: the uniform rate for setting up a trust account. However, there are also some cryptocurrency custodians that exempt users from spending and allow users to set up accounts for free.
Withdrawal fee: Every time you withdraw the cryptocurrency from your account, you will have to pay a fee.
What are the types of encryption hosting?
In short, cryptocurrency escrow represents the maintenance and confirmation that you have the private key of funds in the cryptowallet. In the past, all custodians of credit business were financial enterprises stipulated by law. However, cryptocurrency holders have the opportunity to become their custodians.
Take gold as an example. You can store it under the bed to ensure the safety of assets, or you can pay a third party to lock it in a vault protected by security personnel.
Similarly, encryption hosting also has the above two methods, namely self monitoring and third-party hosting.
1. Self monitoring
Self monitoring means that individuals own the private key of their wallets. This means that you are the only person who can prove your capital ownership and browse your assets. This means that you will be able to fully control your wallet, but you will also be required to bear all the risks. If you can't access your physical device (cold wallet) or forget your private key, your cryptocurrency will probably disappear forever.
2. Third party custody
If you do not want to take the responsibility of controlling your own account, and want to ensure more, or do not want to get along with encryption algorithms, you can also choose the third-party custody method. Generally, these third-party custodians are already registered and regulated financial enterprises, and have obtained state or national permission.
Cryptocurrency custodians will store customers' private keys in their wallets in a secure form to ensure the security of their assets. From the user's perspective, this is similar to setting up a checking account in an institution. When you register to open an account, you must accept and master your customers and anti money laundering inspection. When you choose to deposit cryptocurrency through a third-party custodian, you need to complete the same type of checks to ensure that your cryptocurrency is not obtained by illegal means.
Speaking of this, I believe you have a certain understanding of how encryption hosting works and the types of encryption hosting. In general, as digital assets become mainstream, business opportunities continue to grow. These include stable currency, central bank digital currency (CBDC), security currency and NFT. Hosting services are a key consideration. These services can be used as a trust for depositing stable currency or CBDC, and are equally important for monetized financial products.