Just like you use a wallet to store or protect your paper money, digital wallets are used to store digital money. Digital money or digital currency means any payment that entirely exists in electronic form. Cryptocurrency is the encrypted form of digital currency. With the seismic shifts in the technological world, it goes without saying that cryptocurrencies are the very future of business around the globe. To help users manage their digital currencies, crypto wallet apps have been launched over the last few years.
What is a Crypto Wallet?
A crypto wallet stores cryptocurrency when it is not in use, just like physical cash is stored in a physical wallet.
Two things are vital to transact virtually: wallet address and private key. A crypto wallet address is composed of numbers and letters that is used for sending and receiving crypto transactions. It is just like a bank account number or an email address. Whereas a private key is a form of cryptography that allows the user to access their cryptocurrency. It is just like a Pin code used to access the funds in a bank account. It saves the user from theft or unauthorized access to funds.
Do you need a Crypto Wallet?
Having cryptocurrency stored in a safe place has become sort of an unsaid need for crypto investors. Most cryptocurrencies allow users to store their assets within a wallet on their own site: which is what conventional users go for. But what if you have invested in multiple cryptocurrencies? Managing different wallets on different exchanges could be a big hassle all in itself!
If you are planning to invest in various digital currencies like Bitcoin, Litecoin, Dogecoin, Ethereum, etc., then storing it all in a secure crypto wallet instead of a digital exchange (platform that allows users to trade cryptocurrencies) would be a better idea.
Types of Crypto Wallets
Being a new crypto investor, it is difficult to differentiate and understand which crypto wallet would be most suitable for you. However, do not you worry because we have got you covered!
Here, we have mentioned different types of crypto wallets and their core functions in order to help you make informed decisions about how to store your digital currency in safe and secure environment.
Desktop wallet is a software application installed on a desktop used to send or receive cryptocurrency. It is more secure and reliable because the data is stored on your system unlike crypto exchanges. But you do need an antivirus system in your computer to identify all types of malwares in real time to prevent them from infecting your computer during cryptocurrency transaction.
Mobile wallet is an app that you can download in your smartphones and access your bitcoins easily from anywhere or anytime. It can store various kinds of cryptocurrencies. It’s ease-of-use makes it an attractive choice, however, it does run the risk of losing the data since mobile devices do tend to occasionally get lost or hacked.
Hot or Web Wallet
Hot or Web wallet is a virtual currency storage space available on any web browser like Google Chrome, Microsoft Edge, Mozilla Firefox, and Apple’s Safari. Just like you sign up for PayPal or Stripe, you must sign up for an online exchange to access your hot or web wallet. For short term investment, it is a good option for a quick transaction or virtual trading of a small amount.
Cold Wallet or Cold Storage
Cold wallet or cold storage is the offline wallet. If you want to invest for the long term, then cold wallet is a good option for you because of its hack resistant nature. It has two types – Hardware and Paper.
This stores your private and public key or virtual address in a device that is not connected to the internet. These wallets are physical devices, some of which can be used by side buttons or OLED screens. These are considered to be the most reliable and safe options for large investments. However, it is advised to always buy first-hand or from a manufacturer and not from a third party to avoid the risk of the device being tampered by a hacker.
This is a piece of paper that contains private keys and QR codes used for cryptocurrency transactions. It is not connected to the internet. It is suggested to laminate the paper in case you lose it or the ink fades away.
Making the Right Crypto Wallet Choice
Before deciding on the type of crypto wallet you would use to store your digital currency, it is imperative to thoroughly evaluate and understand your goals and risk tolerance.
Are you interested in having your cryptocurrencies stored for a long-term basis without buying or selling them? Or do you want to keep your multiple cryptocurrencies secured in one location and trade them occasionally?
Answers to these questions, the extent to which you are willing to bear possible security risk, and your overall usage of digital money can put you in a better position to make a sound decision about which crypto wallet is the best for you.
Coinbeam – an all-in-one crypto wallet app – is coming to you very soon to make your crypto life easy, safe, and secure.