A cryptocurrency wallet contains public and private cryptographic keys to your cryptocurrency. It is essential to understand that the wallet does not store the cryptocurrency directly but only the keys that provide access. With the help of a public and private key, you can make crypto transactions – buy, sell and exchange your assets. For example, you can send and receive bitcoins.
In essence, cryptocurrency wallets are programs that interact with the blockchain in which your cryptocurrency is located. In other phrases, crypto wallets deliver the blockchain with “proof” that you hold specific cash or tokens.
Why do you need a wallet to store your keys and not the cryptocurrency itself? The blockchain is designed so that the keys are proof of ownership. Without the keys, you will lose your crypto coins or tokens.
Today, there are many forms of crypto wallets, both on physical media (flash drives, memory blocks, etc.) and digital.
How does a crypto wallet work?
A crypto wallet is essentially software or an application. You can think of it as an application for your bank in the blockchain world. However, crypto wallets are also available as USB-like physical devices that contain software and keys.
One crypto wallet, such as Trastra can store many different cryptocurrencies if the developers have provided a connection to different blockchains. There are also crypto wallets designed for one blockchain – for example, bitcoin or Ethereum.
Types of crypto wallets
The two primary kinds of wallets are hot wallets and cold wallets. The third style we have determined is the cryptocurrency exchange wallet, a singular point of a hot wallet.
- Hot wallet
Online crypto wallets are called hot. These software wallets are available as web apps and mobile and desktop apps. The key feature is that these wallets are constantly connected to the Internet, whether custodial or not.
The main advantage of hot wallets is speed and convenience. Since they are already online, transactions can be made quickly and easily. This makes hot wallets ideal for everyday transactions like buying coffee, sending crypto to a friend, or buying tokens from an exchange.
- Cold storage wallets (hardware wallets)
Hardware wallets that physically store keys are called cold wallets. Usually, these are USB devices on which private keys are stored. However, there are other types of devices. Also, any storage medium without access to the network can become a cold wallet – even a piece of paper on which a private key is written.
Since cold wallets do not have constant access to the Internet, they protect the cryptocurrency much better. Even connected to a device with Internet access, they are not vulnerable to hacking because the digital signature is performed inside the machine.
Which crypto wallet to choose?
You need to choose a crypto wallet based on your goals. Some people need to process transactions quickly and need access to many different cryptocurrencies. In their case, the choice will favor hot multi-functional wallets, such as ripple online wallet, etc. Cold wallets are better suited for the safe storage of bitcoin for investment purposes; In any case, it is worth paying attention to such selection criteria.
Safety
The number one factor when choosing is safety! While it is inextricably linked to the type of crypto wallet, you may want to explore further the security protocols and features of the wallet you are considering.
Most users choose hot wallets because they are easy to use. However, since they can be vulnerable to attacks, you should choose one that provides strong protection. Also, look for historical wallet data to see if there have been successful attacks in the past.
Important! If you have a large amount of cryptocurrency, it is better to get a cold wallet and not tempt fate.