Bitcoin Wallet

What is a Crypto Wallet?

By May 23, 2018 No Comments

Cryptocurrencies, just like money, need to be securely stored. Cryptocurrencies are stored in Crypto wallets, similar to the way money is stored in a physical wallet. The coins are not stored in the crypto wallet. This wallet consists of digital codes of two types: Private and Public Key. The Public Key is visible to all and is used by people to send money. The Private Key is used only by the owner of the wallet to perform send transactions. Loss of private key will result in loss of control of over the wallet and this will result in loss of currency. It is therefore recommended to save your Private Key is two or more different places.
The Crypto wallet is a digital wallet that is used to send, receive and store cryptocurrencies securely. How do you choose your crypto wallet? Here are some basic functions that you should be on the lookout for when selecting a wallet:
Good Reputation: It is necessary to make sure that the wallet you are using has good reviews and reputation. The status of any wallet including the pro and cons can be known by checking out the features and feedbacks.
Software solutions: It is always recommended to avoid using certain software solutions that carry the malwares under the disguise of wallets. Wallets with such software solutions are always prone to be attacked and infiltrated. The best way to choose safe wallet is sticking to reputed providers.
Best Practices: Apart from the above considerations, the principle of sticking to the best practices helps in keeping the crypto wallets safe. It is a wise practice to keep a backup of your private keys using a storing device. It is also recommended to add an extra layer of security, for example, one can use Google authentication etc.
Classification of Wallets:
There are several types of wallets and choosing one depends on the requirement of the user and also on their purpose. Crypto wallets differ from the features point of view and can be selected on the basis of their pros and cons. It is essential to understand the difference between the cold wallets and hot wallets.
There are many different kinds of wallets and selecting one is dependant on the requirement that the user has.
The two types of wallets that we will discuss here are Hot Wallets and Cold Wallets.
Hot wallets: Hot wallets are like the cash in your pocket and it is accessible through a web portal or mobile app. It is called Hot because of its ability of greater accessibility and activity. It facilitates an environment where easily the activities like trading and other transaction can be performed. But this feature also poses threat since it makes it more vulnerable to attacks.
Cold wallets: Cold wallets are analogous to the saving accounts that are more secure and harder to access. It is less prone to attacks as compared to the hot wallets because it is held offline. It is best suited to the cryptocurrency that is not meant to be used frequently but meant for long-term holding. Although the accessibility in terms of performing transactions is limited but it also reduces the chances of loss of your fund.
Apart from what we have discussed above, there are different kinds of wallets that have been categorised and discussed below.
1. Hardware wallets:
A Hardware wallet is considered to be the safest kind of wallet used to store cryptocurrencies. Accessing it is easy but relatively less friendly than a web or desktop wallet. It exists in the form of a portable device like the USB drive. It acts as a wallet that can store various cryptocurrencies and as it is offline, it is also considered a cold wallet. Trezor, KeepKey and Bitbox are some examples.
2. Software wallets:
These are considered as ‘Hot’ wallets because software wallets are frequently used with the internet. These can be stored on different devices and thus provide easy access to coins. Software wallets are of the following different types:
Desktop wallets: One of the most secure options available to store cryptocurrency. It is accessible through the software installed in the devices and the private key is stored locally. Desktop wallets can be used with the system or other devices connected to the internet and it can also act as a cold storage device if used without internet.
Mobile wallets: Wallet accessible through cell phones are very convenient to use and come with decent security features. A mobile app can be easily downloaded and quick transactions can be performed using features like QR codes.
Online web wallets: Online wallets require internet connectivity for operation and can only be used online. These are also referred to as “cloud wallets” as several third-party wallets allow their software to be used through the cloud. Here the major issue is that the private key is generally stored on a centralised server.
Multi-Signature Wallets: Multi-signature wallets make use of multiple keys to operate. It reduces the chances of attacks as it is very difficult to get access to more than one private key. Another advantage is during the loss of a private key, the alternative key may help in getting the backup. The main motive behind deploying multiple keys are:
Adding an extra layer of security to the wallet and preventing the possible attacks from hackers.
Creating a wallet that can be used by one or more user.
Paper wallets:
Paper wallets provide a way to keep cryptocurrencies in the hard copy format. These can be termed as the true cold storage wallets for cryptocurrencies. The process of using these wallets involves printing out the public and private keys (in the form of QR codes to be scanned for performing the future transactions) or the generated paper wallet and then, storing it safely. Here there is no scope for any form of online attack or malware.

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