One important thing to do before investing in any cryptocurrency is to ensure you’re comfortable with how it will be stored. The term “crypto wallet” can mean many different things; some wallets are safer than others.
A Crypto wallet is a software program that store private and public keys and interact with blockchains to enable users to send, receive, or monitor their digital currency balance.
To understand a cryptocurrency wallet, it’s important to know that cryptocurrencies are not physical objects. Instead, cryptocurrencies are digital assets on the blockchain, simply a public ledger that records transactions between people and their crypto wallets.
A cryptocurrency wallet stores your private and public key, allowing you to send and receive crypto coins and monitor your balance of funds.
You can think of your crypto wallet as an email account. If someone sends you money in bitcoin or another currency via their crypto wallets, they’re sending it directly into yours (like an email inbox), where it will stay until you decide how much (or little) of the balance should be spent on something else.
The main difference between this analogy and what happens with cryptocurrencies is that no one has access to your personal information except yourself.
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How do crypto wallets work?
Crypto wallets function similarly to traditional bank accounts but have key differences. You need your wallet’s private keys and public address to deposit and withdraw funds.
The private keys are a series of numbers and letters that act as the password for your wallet. The public address is like your bank account or credit card number — other people use it to send money to your wallet. The private key is your PIN or password, while the public address is your account number or routing information.
The most important thing to understand about crypto wallets is that they aren’t physical things — they are software programs stored on hardware devices such as smartphones or computers. This means that when you “have” bitcoins, litecoins, ethers, or any other cryptocurrency, what you own is access to this software program that allows you to access those coins from anywhere in the world.
Types of crypto wallets
There are many types of cryptocurrency wallets. The main ones include:
Hot and cold wallets
A hot wallet is a wallet connected to the internet, while a cold wallet is not connected to the internet. Hot wallets are more convenient than cold wallets because they can be used anytime without synchronizing with the blockchain. Cold wallets must be synchronized with the blockchain before they can be used.
Hot wallets are more vulnerable to hacking attacks because hackers can access them remotely through the internet if they find out their private key or seed phrase.
This is why most experts advise users to keep only small amounts of money in hot wallets for day-to-day transactions so that hackers cannot steal their entire funds if they discover their private key or seed phrase by accident.
Hardware wallets
Hardware wallets are physical devices for storing your cryptocurrency offline, so hackers cannot steal it online. They are considered among the safest storage methods because they protect your coins from hackers and can also be used to sign transactions with a private key or seed phrase.
You can purchase hardware wallets from most cryptocurrency exchanges and some retailers.
Paper wallets
Paper wallets aren’t really “wallets” but rather pieces of paper with your public and private keys written down on them in an offline environment that provides no access to the internet or other computers used for hacking.
These are considered one of the most secure ways to store cryptocurrencies because it’s impossible for someone else to steal anything from you if their hands never touch anything digital.
Online (web) wallets
These wallets are hosted on the web and are accessible through any device with an internet connection. They have less security than hot wallets because they’re exposed to hackers and malware. That said, online (web) wallets can be convenient because they don’t require downloading anything or creating an account.
Desktop wallets
These wallets are installed on your computer and are accessible from any device connected to that computer. They’re more secure than online (web) wallets because they don’t expose your private keys to the internet—making them more difficult for hackers to access.
Mobile wallets
These wallets are installed on your smartphone and can be accessed from any internet-connected device. They’re more secure than online (web) wallets because they don’t expose your private keys online—making them more difficult for hackers to access.
Examples of Crypto Wallets
- Ledger. The Nano S and Nano X are examples of Ledger’s line of hardware wallets;
- Trezor. Trezor offers two hardware crypto wallets: the Trezor Model One and the Trezor Model T;
- SecuX. The SecuX portfolio of hardware wallets includes the V20, W20, and W10 devices;
- SafePal. The SafePal S1 is SafePal’s primary product, offering a low-cost alternative to other hardware wallets.
Examples of hot wallets are the following:
- Coinbase. Coinbase offers online, desktop, and mobile wallets for cryptocurrencies;
- Exodus. Exodus is a desktop and mobile wallet that can be integrated with the Trezor hardware cryptocurrency wallet;
- Crypto.com. Crypto.com offers various services, including mobile and web wallets for digital currencies and exchange;
- MetaMask. MetaMask is an extension for the Firefox web browser and an app that can be downloaded from Google Play or the Apple store;
- Trust Wallet. Trust Wallet is a mobile cryptocurrency wallet option supporting nonfungible tokens (NFTs).
How to choose the best crypto wallet
Here are some things to consider before choosing a crypto wallet:
- security is your number one concern. You cannot recover your funds if you lose your private key or password. We recommend using hardware wallets like Ledger Nano S or Trezor, which are more secure than software wallets. However, they require you to buy a physical device (which costs $70+);
- ease of use doesn’t matter much if you don’t plan on using the wallet often. However, if you plan on storing large amounts of money in your wallet for long periods, we recommend using an online web-based wallet or a desktop client, as they offer robust security;
- your choice may also depend on the type of currency you want to store in the wallet. For example, if you only plan on storing Bitcoin, you can use any type of wallet available (software or hardware). But if you want to store different cryptocurrencies like Ethereum, Litecoin, and Bitcoin, choosing a wallet that supports multiple cryptocurrencies is better.
Crypto wallets are necessary tools to store you cryptos safely
A crypto wallet is a tool that enables you to send, store, and receive digital currency. There are many choices if you want to buy, sell and trade cryptocurrencies, such as Bitcoin, Ethereum, Ripple, and Litecoin.
With your crypto wallet, you can send and receive cryptocurrency to and from others at will. It’s fast, it’s secure, and it’s free to use. So what are you waiting for? Get your crypto wallet today and start sending some cryptos!
Read also: Cryptocurrency scams: 6 warning signals to consider
