What is a Hosted Wallet?
A Hosted wallet is a peer-to-peer technology that allows its users to store their private keys in a computer on the Internet. It functions like an ATM with a minimum of resources. Most Hosted wallets require a separate desktop PC to function.
You will need to download and install a Hosted wallet program on your computer. For beginners, a free Hosted wallet is available at Bitcoin.org. The downside is that Hosted wallets require the user to have an Internet connection to retrieve their private keys.
Before sending any funds from your wallet, you will need to generate a seed (private key) for safekeeping. This seed will be required in order to access your funds. If your private key gets lost or corrupted, then all your funds are lost.
You should not keep your private key on your hard drive, in your wallet, or on any other public computer. Keeping your private key on your computer will cause it to be vulnerable to theft and loss. Your private key should never be sent through email or on a website. It should never be kept on a shared computer network such as a public library or classroom.
If you accidentally lose your private key, then you will lose all your funds. Since Hosted wallets do not require you to transfer funds to another wallet, your funds can be lost without any sign of fraud. In order to recover your funds, you will need to spend the amount that you just transferred out. The entire process can take weeks to complete.
Since Hosted wallets are quite new, there is no guarantee that the wallet you choose will not become obsolete or insecure. Therefore, you should only make a decision to use a Hosted wallet after doing a lot of research. There are a number of wallets available.
Before choosing a Hosted wallet, you should look for a website that has been around for a while. With so many options, it is very easy to pick the wrong wallet. Look for a high-quality website with user reviews.
Always avoid using your private key in transactions on untrusted websites. Using a professional Hosted wallet provider is much safer than using an amateur one. Even if the security of a Hosted wallet is not as good as you’d like, you will still be protected by an organization that has proven to be trustworthy.