Where do you store your physical money during the trip? The most obvious answer to the question is in the portfolio. While cryptocurrencies have fundamentally changed the way we perceive money, wallet usage is still popular.
there The first thing You need to buy, receive or sell cryptocurrency which is a crypto wallet. Without this wallet, you cannot make any transactions. Moreover, although blockchain technology provides optimum security, it is you Cryptocurrencies are only as safe as your wallet.
Transactions in cryptocurrencies require a combination of public and private keys. The other person involved in a transaction uses the public key to send or receive transactions from you. The private key is available only with you and is used to initiate any transaction.
Your keys are stored in the wallet. If someone hacks it, you will lose all your cryptocurrency. So, Choosing the right wallet for all your needs is key. But with so many options available, it can be difficult to choose and configure the right wallet.
There are several types of wallets available, and each has some advantages and limitations. Knowing these types can help you make the right decision to store and protect your private keys. But before we get into it, let’s understand what a cryptocurrency wallet is and why do we need it?
What is a crypto wallet?
Cryptocurrencies are not like traditional physical money. Hence, the ownership is also different. Since cryptocurrencies are not physical money, They need two transaction keys: public and private. These keys are alphanumeric codes that facilitate the buying, selling and trading of cryptocurrencies.
If you know the private keys, you can access your crypto assets such as cryptocurrencies and NFT from any device.
Simply put, a crypto wallet does not store cryptocurrencies but your keys. You can still think of cryptocurrency wallets as traditional wallets. The only difference is that It protects your keys associated with crypto assets rather than protecting the funds themselves.
You will find hundreds of cryptocurrency wallets to choose from. Each of them has its own set of benefits. For example, some wallets are more secure, others allow you to store more cryptocurrencies, and some are easily accessible from any device.
Below is a file Youtube video that share some of Most Popular and Secure Cryptocurrency Wallets of 2022. It discusses Trust, MetaMask, Coinbase, Trezor, and other wallets. You can browse through the video to see how each wallet works and choose the right one for you.
Main Categories of Cryptocurrency Wallet
Cryptocurrency wallets are It is broadly classified into two main categories: hot and cold. The use of both classes is the same. The only significant difference between the two is how and where the cryptocurrency is stored.
Hot wallet too It’s called a software wallet, is an online storage method. This means that hot wallets are online and store your private keys online. Thus, you can access these wallets from your computer or smartphone.
Because of the internet connection and hot wallets They are not as confident as their peers. Online attackers can hack your online wallets and get your private key information to steal your cryptocurrencies. This is how most crypto scams happen.
A similar encrypted attack occurred onCrypto.com exchange. According to the blog shared by the official team, the accident Infected 483 users and withdrawn 4836.26 ETH and 443.93 BTC And some other coins, which is equivalent to stealing nearly $ 35 million.
“Often associated with the exchange, they are often easy to use and really opened the way to a more mainstream market,” says Nicole Dicko, founder of CryptoConsultz.
hot wallets Free and easy to access on any device. Additionally, you don’t have to worry about tracking your physical storage device. However, the advantages of hot wallets come with security concerns.
Cold wallet, sometimes It’s called a hardware wallet, is an offline storage method. You can think of these as a USB drive that stores the details of your private key. Using cold storage options improves the security of crypto assets. However, there are still chances of losing crypto assets.
Cold wallets are more secure than hot wallets, but they are still vulnerable to theft or loss of cryptocurrency.
A little bit of the Possibility of losing cryptocurrencies in cold wallets Include:
- If you lose the physical memory of the device
- If you buy it from an untrusted source, it can tamper with your device to steal all the information
Unlike their hot counterparts, cold wallets are not free. It may be necessary Spend from $50 to $200 To purchase a physical storage device.
hot vs. Cold wallets: which is better?
After learning about hot and cold crypto wallets, the first question that comes to mind is which one is better. the answer It depends on your needs and usage. The only thing that is certain is that wallets provide greater security for trading.
Each exchange has its own wallet. However, instead of holding cryptocurrencies on exchanges, you should have a crypto wallet for an extra layer of security.
If you have a hundred dollars invested in cryptocurrency, you can keep it in the same cryptocurrency exchange. But if you have invested hundreds and thousands of dollars, then storing the assets in a crypto wallet will be beneficial.
nothing There is no definitive answer to hot and cold crypto wallets. As already defined, each has some advantages and limitations. So it will help Analyze what you want from the wallet to choose the right.
Therefore, if you plan to hold crypto assets for a long time, cold wallets are better. But if you use them for frequent trades or you are looking for money in the short term, hot wallets are best.
Easy access to hot wallets. You don’t have to worry about any physical device being tracked. But the problem is that it is vulnerable to cyber attacks and hacking. On the other hand, cold wallets Safer but more difficult to maintain.
Types of cryptocurrency wallets
Now that we know the main categories of cryptocurrency wallets, let’s break down the different types. There are 5 types of cryptocurrency wallets. here they are:
Web wallets are a type of file Hot wallets or programs. As the name suggests, these wallets are found on the web and They don’t ask you to download certain desktop or mobile apps. Since you can quickly access these wallets via a browser, they are called web wallets.
- Faster transactions because you don’t have to worry about app or server issues
- Easily accessible from anywhere using your password
- Ideal for small amounts of cryptocurrency
- Easily and quickly incorporated into any stock exchange
- Vulnerable to scams and hacking
- Some web wallets may contain outdated security measures
- The private key information is saved on a third-party website
Popular web wallets are MetaMask, Coinbase, Coins.ph and other cryptocurrency exchange wallets.
mobile phone wallet
Mobile wallets are a kind of Hot wallet is available as a mobile app. You can use these wallets and access them via smartphone. It provides more flexibility Where you can access your crypto assets from anywhere from a mobile device.
- Provides additional flexibility as you can log in with your smartphones
- It provides additional features over other wallets, such as using QR codes for transactions
- Easy to adopt and use
- It can be suggested jointly because mobile devices are vulnerable to hacking and theft
- Your phone must be virus-free to avoid losing cryptocurrency
Some common examples of mobile wallet include Coinomi, Mycelium, and BitPay.
Desktops are a type of file warm wallet. They are similar to mobile wallets, with the main difference that you need to install a desktop app to access them. These wallets are more secure than other hot wallets. However, the level of security still depends on how you use your desktop.
It is recommended to use an old laptop that you do not use for other transactions and is usually offline.
- Easy to use thanks to the excellent user interface
- When used on a desktop or laptop computer that is never connected to the Internet, it is an excellent choice for combining hot and cold storage
- Private keys are not stored in a third party site
- If the desktop is connected to the Internet, security problems will appear
- You must have a backup because if your computer or laptop crashes, you will lose encryption resources
- Vulnerable to malware and viruses
Examples of good desktop wallets are Exodus, Electrum, and Bitcoin Core.
When considering the types of cold wallets, Hardware wallets are the best choice. Although they less intuitiveI am Safer For all types of hot wallets and easier to use than another cold storage option, paper wallets. These are the best options for storing a lot of cryptocurrency that you don’t want to transfer frequently.
Hardware wallets come with a wide range of options. Some have small screens built in to allow quick access, while others do not. Some require batteries to operate, and some do not.
- A safer option for long-term storage of crypto assets
- Not vulnerable to hacking
- Easier to use than paper wallets
- The private key never leaves the physical storage device, not even during a transaction
- Less user-friendly, especially for new users
- Not easy to find and buy
Examples of hardware wallets include products from Ledger, Tresor and Kipke.
Paper wallets are basically a kind of cold wallet. As the name suggests, it is a piece of paper that contains all the information and details needed to start and complete a crypto transaction. Like other cold wallets, paper wallets Offer more security but can get lost.
Paper wallets cannot send partial funds and are very complicated to use. Therefore, it is not recommended to use paper wallets.
- A secure option for storing private keys for cryptocurrency
- The information is not stored on a third-party server
- Not easy to access and usable
- It is not easy to move slow transactions like cryptocurrencies with fiat wallets
Examples of paper wallets BitAddress.org and Bitcoin Armory.
There is no one-size-fits-all solution for all cryptocurrency wallets. Therefore, it is necessary Choose a wallet according to your needs. Each wallet comes with a different level of security and functionality.
Discover all the advantages and disadvantages of all the available options and compare the features to be sure Select the crypto wallet that fits all your needs.