The concept of crypto wallets is probably familiar to every cryptocurrency user. It is just as important to understand these wallets and their applications as it is to purchase coins. There is a basic idea behind crypto wallets, and the term itself is self-explanatory to a certain extent. However, what if we told you that crypto wallets do not store any cryptocurrency in themselves?
Comparison of different types of crypto wallets should also be undertaken when investing in crypto. Apps such as Coin Switch allows users to keep their funds, making them similar to online cryptographic wallets. What are the advantages of the two?
The majority of us keep our cash and credit cards in a wallet to protect them. In the same way, many crypto investors discover that they must store their assets in a safe location to keep them safe. The following are a few differences between our real and virtual lives:
A crypto wallet doesn’t store your cryptocurrency. Using a key, you can access your holdings on the block chain. Your holdings are stored in the block chain. You can only make transactions using crypto wallets if you have access to your keys. Private Keys work like a PIN code from a debit or credit card; they allow only confirmed users to transact and prove ownership of the funds.
Crypto wallets are software applications that let users interact with block chains, enabling them to buy and sell cryptocurrencies. Additionally, they allow users to view their accounts and monitor their portfolios.
What Can a Cryptocurrency Wallet Do?
Here are some features of a crypto wallet that might make you think about looking for one if knowing what wallets are used for hasn’t already convinced you.
Ownership: With a private key that only you can access, you are the ultimate owner of everything in your wallet. This is an excellent way to protect your ownership rights without getting third parties involved
Simple to use: Easy access is a crucial feature for regular cryptocurrency users, and wallets can make life considerably simpler in that regard.
Accessibility: You can access your crypto portfolio from anywhere you have internet access.
You can also store your crypto portfolio offline. This wallet type offers the advantage that it is usually impervious to cyber attacks, especially if it is hardware. Some of them can remain safe and secure even when they are exposed to a computer infected with a virus.
Cryptocurrency wallet types
Block chain transactions can be conducted with a variety of wallets, each of which serves a unique purpose. Hot wallets are usually classified into online and offline wallets. It’s good to look at the different types of crypto wallets available before choosing since there are no one-size-fits-all solutions.
Internet-connected hot wallets are designed primarily for everyday users. Accessible from anywhere that has an internet connection, they are easy to set up. There are risks attached to this, as a hacked hot wallet can lead to all your assets being lost.
Types of hot wallets:
- Desktop wallets: These are downloadable applications that can be used on laptops or desktops. Using the applications, private keys can be stored within a data file.
- Web wallets: These can be accessed using a web browser without requiring any applications or software to be downloaded. Which is more similar to a Bitcoin wallet.
- Mobile wallets: These wallets are essentially mobile applications that allow you to exchange money via your smartphones.
The advantage of cold wallets is that they are connected to the internet only during transactions. The devices are usually hard drives or USBs. Despite being more secure, cold wallets also have some disadvantages. In the event of damage to your cold wallet device or losing your key, you will not be able to access your hard drive and may lose all of your assets forever! They can also be expensive.
Cold wallet types
- Paper Wallet: A paper wallet consists of a printed piece of paper containing both your private and public keys, which you can access via a QR code.
- Hardware wallets: A form of cold storage device that stores the user’s private key on a secure hardware device.
Are exchanges a secure option for storing private keys?
If you plan to hold onto your crypto assets for a long time (HODLing), then crypto wallets are safer and more secure than the exchange where you bought them. If you plan to do short-term trading or long-term investment, you should decide which one to use. However, your choice will also be influenced by the exchange you use, since some do not offer you storage options at all.
You should invest in a cryptocurrency wallet. In the event you need more time to explore the various crypto wallet options available in the market and are just starting as an investor, you can always start with a platform like Coin Switch that lets you store your assets while you make your way through the various crypto wallet options.