If you want to use crypto you are first going to require a crypto wallet. But exactly what is a crypto wallet and how does it work? In this post we will explain what a crypto wallet is and the different types of crypto wallet you can use.
What Is A Crypto Wallet?
Firstly, what is a crypto wallet? A crypto wallet is different to a regular wallet you use to hold your cash, it does not hold your cryptocurrency. Cryptocurrencies are stored on a database known as a blockchain which can only be accessed with your private key. A crypto wallet is used to securely store your private keys that are in turn used to access your cryptocurrencies and other blockchain based assets such as NFTs.
Your private keys are extremely important as they prove your ownership over your cryptocurrency and allow you to carry out transactions. If you lose these keys you won’t be able to access your digital assets. And if somebody else gets access to your keys they can take full control of your assets. This is why wallets can provide a safe and secure storage solution for your passkeys.
There are several different types of crypto wallets available, each with their own pros and cons. They can be classified into two types – hardware wallets and software wallets.
A hardware wallet is a physical device that connects to your computer. Software wallets can include web-based, mobile or desktop wallets. We will look at some of the main ones below.
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Crypto Wallet Types
Now we know the basics of what is a crypto wallet, let’s take a look at some of the different crypto wallet types. There are lots of different crypto wallet types, some free and others paid for, each offering something different. Which type of wallet is right for you?
A paper wallet is not really a wallet at all – as the name indicates it is usually a case of writing down your passkeys on a physical piece of paper and storing it somewhere safe. As this is not stored digitally it does make it harder for others like hackers to access. However it does have a greater risk of being lost and is less convenient than being stored digitally.
This method doesn’t cost anything but is the least secure and is not recommended.
Hardware wallets are usually small external USB devices that connect to your computer and are a type of cold storage. The benefit of these is that they offer a good balance between convenience and security. As they are physical wallets that need storing when not in use the device itself could be lost.
Although hardware wallets are more secure they can also be quite costly to purchase.
Software wallets are stored and accessed digitally which offers the greatest user convenience. The main types of software wallet are listed below.
- Web-Based Wallet – are usually hosted on a cryptocurrency exchange such as Coinbase, with the keys being managed by the wallet provider. This is known as hot storage as the wallet is always connected to the internet which allows easy access but also has the potential to be hacked.
- Desktop Wallet – A desktop wallet is for PC users to store and manage their keys locally on their hard drive. There are many desktop wallet providers available including MetaMask and Exodus.
- Mobile Wallet – Like a desktop wallet but used on mobile devices. They are usually a type of hot wallet as they require an internet connection to work. This can make them less secure than cold wallets but are more user friendly and offer good convenience.
What Is A Crypto Wallet Conclusion
A crypto wallet is essential for anybody that holds, uses or trades cryptocurrency or other digital assets. They are a secure way to store the passkeys needed to access your cryptocurrency stored on the blockchain. It is extremely important to keep your passkeys safe as without them you won’t be able to access your assets.
There are several different crypto wallet types including paper wallet, online wallet and hardware wallets. Each one offers a different trade off between security and convenience.
So if you’ve been wondering what is a crypto wallet, hopefully this post has helped clear this up.
View more cryptocurrency posts on our blog including these;
- Ways to get free cryptocurrency.
- Create an NFT for free.
- Latium freelancing – work and hire in crypto.
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