These are wallets that are stored by a third party—usually on a remote server, so the information is easily accessed from anywhere, no matter what computing device you're using. That is to say, third-party wallets are almost exclusively web wallets, and the third party in question is usually a digital currency exchange. The cloud computing accessibility is an attractive perk, but some investors feel it comes at the sacrifice of some security and peace of mind—more on that in a moment.
Another advantage of third-party wallets is evident when updates are made to the wallet software. For you, the investor, it happens invisibly; there are no emails, text messages or pop-ups telling you an update needs to be downloaded. The exchange maintaining your wallet will apply any changes that need to be made to all the wallets currently under their care. You may get a message that gives the details of the update, but that's it; no further action on your part will be necessary. Additionally, you don't have to set aside any hard drive storage space on your PC or smartphone, since all your wallet info is stored on remote servers.
When you're shopping around for a wallet, and you're considering using an exchange for your wallet storage, arm yourself with some important questions to ask first. Find out who will have access to your information—not just the currency itself, but your public and private keys. Ask about the layers of security the exchange uses to protect its investors' wallets. Do some research of your own to discover the exchange's reputation; trust us, if there are issues with a specific exchange, there will be articles and forum posts about it. If your questions and concerns aren't satisfied when you talk with an exchange representative, perhaps it's best to find another—or maintain your wallet yourself.
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