A wallet is necessary for people wanting to trade, use, or ‘hodl’ Dogecoin. There are many ways you can get a wallet, and the best choice of wallet for you is dependent upon the purpose for which you intend to use your Dogecoin.
Generally speaking, there are two overarching categories of wallets: ‘custodial’ and ’non-custodial’, depending on whether you are the sole holder of your wallet’s private key. Additionally, wallets can be ‘hot’ or ‘cold’, depending on whether they are connected to the internet or not.
Custodial Wallets and Non-Custodial Wallets
A custodial wallet is a wallet to which you do not hold the private key. In this case, the term “custodial" means that a trusted entity other than yourself holds custody of the coins on your behalf and manages the private key. Examples of custodial wallets include web-based exchange wallets.
Advocates of custodial wallets appeal to the convenience of these types of wallets, and are typically favoured by people who trade Dogecoin more frequently.
A non-custodial wallet, on the other hand, is a wallet where you hold and control the private key to your Dogecoin. Many smartphone wallets, Dogecoin Core, and hardware wallets are examples of non-custodial wallets. Instead of the keys to your wallet being stored by a centralised third-party, non-custodial wallets store your private keys locally. This is why many people prefer non-custodial wallets, and is where the popular saying ‘not your keys, not your coins’ comes from.
Having said this, it’s very important that people who use non-custodial wallets don’t lose their private keys or seed phrases! This can be avoided by backing-up your non-custodial wallet, and is why you should never share your seed phrase or private key with anyone you do not trust.
Hot Wallets and Cold Wallets
In general, a hot wallet is a wallet that is connected to the internet. Examples of hot wallets are Dogecoin Core, browser extension wallets such as MetaMask and the like, and smartphone wallets. A hot wallet can be custodial or non-custodial.
A cold wallet is a wallet that is not connected to the internet. Hardware wallets and paper wallets are examples of cold wallets. Many people think that cold wallets are inherently safer than hot wallets, and are typically preferred by people who intend to ‘hodl’ their Dogecoin long-term, and want to keep it especially safe.
Having said this, non-custodial hot wallets, such as smartphone wallets, are regarded by most people as being safe enough to be used for day-to-day expenses and for holding small amounts of Dogecoin.
Remember, too, that you can always use more than one wallet for your Dogecoin! With virtually zero fees, transferring between wallets is so cheap that many people have a variety of wallets for different purposes. For example, it’s common for people to use a hardware wallet or other cold-wallet to store larger amounts of coins, but use a custodial or non-custodial hot wallet solution for daily purchases. The choice is yours!