How Does It Work?
“What is crypto wallet?” A question that sooner or later comes to everyone interested in cryptocurrency. In a few words, a cryptocurrency wallet is a program that allows you to store, send, receive or, in some cases, buy and sell your crypto assets (Bitcoin, Litecoin, Ethereum, etc.). If you decide to invest in cryptocurrency, then in any case, you need to have dealings with such a wallet.
The vast majority of people who use cryptocurrency wallets don’t know how they are arranged and work. Let the word “wallet” not mislead you, because “cryptocurrency wallet” has no connection with its generally accepted meaning. In fact, these wallets do not store your funds in any particular place. They only display the current status of transactions and records in the blockchain.
For example, when you send Bitcoin to another person, you simply transfer the ownership of the coins. To gain access to these coins (send or receive), the private key (in fact, this is the “key” that only you have) should match the public key (and this is the “lock” visible to the network participants). Nothing is physically sent anywhere, but there is a change in the balance of the sender and receiver.
What Types of Cryptocurrency Wallets Exist?
Generally, there are three separate types of cryptocurrency wallets — software, hardware, and paper. Each of them has its advantages and disadvantages, so you have to choose based on personal needs and opportunities.
Software wallets can be divided into three types:
Online wallets
By and large, this is an online service (that is most likely to get hacked, according to the statistics) that you trust to save your money. Conditionally convenient (access is possible from any computer or smartphone with a browser), but at the same time the most unsafe way to store cryptocurrency. All important information (private keys) is known not only to you but also to the service owners. So if it comes to security, then with the same success, you can ask a passer-by stranger to keep your 10,000 American dollars.
Pros:
- Easy and fast enter
- You can cash out at anytime
Pros:
- The worst security possible
Examples: Blockchain.com, BTC.com
Conclusion: Not recommended by all means (unless you are a trader)
Mobile wallets
The mobile application as it is. The most convenient and fairly reliable option. By the level of protection, mobile wallets are no worse than any others, including hardware. But be careful when choosing, because only non-custodial projects can boast of such a level of security. Otherwise, mobile wallets allow you to perform the full range of necessary functions anywhere and anytime.
Pros:
- Convenient
- Reliable
- Can be used at any time
Cons:
- Try not to lose your mobile phone
Examples: Mycelium, BRD, Plark
Conclusion: Optimal choice!
Desktop
Software for your computer (obviously, you need a PC or laptop.) In fact, this is the only difference between mobile wallets. It is worth mentioning that PCs are more likely to become victims of various kinds of fraudulent attacks and viruses. It clearly weakens desktop wallets’ position in front of mobile competitors.
Pros:
- More or less convenient
- Reliable
Cons:
- Requires desktop computer or laptop
Conclusion: not recommended!
Hardware
The most secure option among the existing ones, but at the same time quite impractical in terms of convenience. A small flash-drive — this is what a hardware wallet looks like. Still, there are cases of glitches and hacks, but they are scarce. Managing your funds can be uncomfortable sometimes since it requires you to connect the wallet to a PC. The average cost of 100 USD can scare away the average user and should be considered too.
Pros:
- Reliable
- Nice-looking gadget 😉
Cons:
- High price
- Not convenient
- Still can be hacked (despite the “top-notch security concept.”)
Conclusion: Good choice for long-term investing.
Paper
At first glance, it’s bizarre, but yes — they exist. There are several services that randomly generate a private and public key (that are used for money transferring) in the usual form, as well as in the QR code format. You can print the whole thing and keep it in a safe place (but remember that it is better to check the condition of the paper every year, otherwise in 10 years or so it may lose the quality of its external properties).
Pros:
- Reliable
Cons:
- it’s a piece of paper
Examples: Bitcoin Paper Wallet, BitAdress
Conclusion: It can be used as a “security hedging tool” or just for fun.
What is the best crypto wallet? It’s always up to you.
