What Is a Crypto Wallet and Why You Need One
With all this noise around cryptocurrency, you’ve finally decided to get into the market? Before you start investing and trading crypto, there is one more thing – a crypto wallet. Just like with cash, you need some place to safely store your assets. You also need a convenient tool to organize your profitable investment portfolio.
How Does a Crypto Wallet work?
Basically, crypto wallets are just software programs designed to work with different Blockchain network types. What is Blockchain? So we won’t go into extra details, I put it in simple terms – Blockchain is a shared ledger that facilitates the history of all supported coins transactions. Due to the way this system records information, it is impossible to hack or cheat it. The “intermediary” between you and a Blockchain network is your crypto wallet that allows you move your crypto around the network and review all transaction details.
How to send or receive crypto with your wallet? The special cryptographic key pair does all the trick. The pair comprises a private and public key that match it.
Sending crypto will involve using your private keys. A private key is as important as your credit card PIN code, so you should do your best to keep it private.
To receive crypto, you will need a public key, namely your wallet address. This key type is more like your bank account number; you can share it with anyone who’s willing to send you some funds. A public key can also be used to withdraw some money from your wallet, but only if you grant permission to do so.
You should note that cryptocurrency is not stored in your wallet as it is. Your public and private keys information is kept there, as well as the total crypto amount you own on the Blockchain. Don’t forget to remember your key pair and keep the private one safe!
What Crypto Wallet Types There Are
Depending on what you’re looking to achieve with crypto, there are different formats of digital wallets with certain advantages and disadvantages. Still, all the wallets come under two main categories: hot storage wallet (software wallets) and cold storage wallets (hardware wallets).
Those who invest in crypto for a long term would find an offline cold storage wallet a more attractive option. The crypto holders who prefer to trade different crypto types all the time will want to use a convenient and fast online hot wallet instead.
Offline hardware wallets
The main purpose of a hardware wallet is to protect your privacy and prevent any third-party intrusion. These cold storage wallets are usually some sort of a flash device similar in function to a USB drive. This device stores your key pair and is not connected to the Internet at all. However, you could still use it for online transactions and combine it with various devices like a pc or a laptop to simplify its use.
A cold storage option is believed to be the priciest one as this hardware wallet is well protected and hard to hack. Trezor and Ledger cold wallets are the most famous providers on the market.
Online software wallets
Such a wallet format is referred to as a hot wallet. While you might treat your cold wallet as a purse you could keep in your pocket, a hot wallet can be considered as your bank account that is accessed online.
Software wallets come in various forms. Here are some of them:
Web wallets. These online wallets run on a cloud and work as a browser extension. All you’ve got to have in order to operate it is a stable Internet connection and a computer device. Such wallet type won’t guarantee you protection from third-party attacks so you should think twice before signing up to your account with a public Wi-Fi. Web wallets worth checking out: Coinbase, Robinhood, Plisio.
Desktop wallets. This wallet type works as an application installed in the one’s computer device. Such wallet type offers better protection than any other hot storages as the user’s account can be accessed only from a device where the desktop wallet is installed. You could begin with Electrum, Guarda or ZenGo.
Mobile wallets. If you’re looking for a wallet that is really easy to handle, a mobile wallet is what you need. This wallet is basically a mobile application that you will need to upload to your mobile device. People usually use such wallets when shopping online thus receiving or sending payments with a QR code on their device. You should keep in mind that mobile wallets have less storage space than desktop wallets. Such wallets are Mycelium, Exodus.
Understanding What Wallet Work Best for Your Needs
Just as it was stated above, different wallets work better for different needs. If you’re looking to save your crypto or hold just a single coin type that you intend to keep buying in the future, a cold storage wallet would work perfectly for you. You should be ready to spend some money on it, but with extra costs comes security of your precious funds.
In case you’re merely looking to trade your crypto, hold different coins and shop for goods online, a hot wallet option is exactly what you need. It might not be as well protected as a hardware wallet, but you will enjoy the convenience and speed it offers you. In this regard, you will have to take care of your funds safety and pay attention to sharing the sensitive data with mediators.
One thing remains unchanged, though: investing in cryptocurrency is an excellent choice. Diversify your assets to make the most of your profits and be responsible for your assets safety.
If you still haven’t decided what wallet is the one for you, or you’re looking to integrate crypto to your business, start with Plisio. They offer the lowest fees on the market, enhanced privacy and responsive customer support for those who’re new to the cryptocurrency world. Create an account for free and keep your crypto holdings secure!