What are Cryptocurrency Wallets?
A cryptocurrency wallet works in a similar way to a physical wallet in the sense that you can keep in it
digital currency.
But the similarity ends there. A crypto wallet is, in fact, a software program stores the private and
public keys required for the owner to be able to interact with their coins’ respective blockchains.
How do they work?
Wallets store the private key of a cryptocurrency, which looks more like private code known to the
user and his wallet. By storing both private and public keys, this allows the wallet user to both send
and receive coins while lodging all transactions.
The private and public keys interact with multiple blockchains, which give the user the ability to
monitor the transactions and balance, whilst executing other operations.
Types of Wallets
There are multiple types of wallets available for crypto storage, some being aimed at being used on
certain devices.
Desktop Wallets
These are
wallets are installed on a personal computer or laptop, and they can only be accessed on
the device they have been installed on.
This type of wallet has among the highest security implementations; however, if the device is hacked,
or infected with a virus, there is a possibility that funds might get lost or stolen.
Online Wallets
Online wallets use a cloud service to store the keys and the cryptocurrency wallet can be accessed from any
computing device regardless of location. While they are more convenient to access, you do not
actually control your funds. Instead, they are controlled by a third party, which makes them prone to
vulnerabilities and hacking attempts.
Mobile wallets
The
mobile wallets are run on the user’s smartphone. They are extremely convenient as they can be
accessed on the go, but they do not have as many features as a larger wallet due to the limited space
on a mobile phone.
Hardware Wallets
Hardware wallets are physical devices that store the keys offline, being considered the most secure
of wallet options.
Hardware wallets are then connected into any computer that has an internet connection, and the user
has to enter their own unique PIN, which will then allow them to make transfers with the currency.
Many people opt for them when they are looking to store their funds long-term and do not require
regular access to the account.
Paper Wallets
Paper wallets are the physical printout of both public and private keys, and can also refer to the
software needed to generate a pair of keys that can then be printed.
As they also represent a form of cold storage, the coins stored in them cannot be stolen or corrupted
by hackers.
Web Wallets
Web wallets keep the wallet’s key on its server, which allows the user to simply log in and access
their coins. These funds can be accessed from any device; however, a company is responsible for the
safety of your coins and servers are often targeted by hacks.
Multi-Sig Wallets
A multi-sig wallet requires two individual to sign a transaction before it is sent out, similar to how a
joint bank account works.
Brain Wallet
Brain wallets involve that the user memorizes its private keys, without leaving an electronic or
a written record of the key anywhere.
How Do I Know Which One Is Right for Me?
Before settling on a cryptocurrency wallet, consider what needs it will have to fulfill.
If you are an active trader, then you would require a wallet which you can regularly and easily access,
such as web wallets. If you plan on holding a larger investment long-term, then cold storage is
recommended.
Also, the number and type of cryptocurrencies is important. If you intend on having a diversified
portfolio, then you have to look for a wallet that has a broad range of support.
There are also other factors that one should examine before proceeding:
Security
Keeping your funds secure is of utmost importance, and is not something that should ever be
disregarded. Some wallets have stronger security features implemented, so it is important that you
do your research thoroughly in advance.
Verify what type of authentication does your chosen wallet have, or how secure is their website.
Also, if you’re dealing with a wallet that holds the user’s funds, make sure that the company keeps at
least 95% of them in cold storage.
Anonymity
If anonymity is something that is important to you, then look for a wallet that doesn’t require ID
documentation or other forms of authentication. Cold wallets are a good option in this case.
Ease of use
If ease of use is what you are looking, scour the internet for reviews made by real users, and select
one that is simple and does not require a lengthy and complicated setup. However, if you are the
more tech- inclined type, you can look for a more complex piece of software/ hardware.
Reputation
Take into consideration what the community has to say about the wallet. If most online opinion on
forums and groups are negative, then you should search for another cryptocurrency wallet. Also, check to see if the company that manages the wallet was involved in any hack, fund loss, or security breaches and how
it handled the matter.
Conclusion
There are plenty of wallets available on the market, each with its own advantages and disadvantages.
We hope that our article will help you find the right wallet that will suit your needs.
Featured image: Currexy.com
