If you want to join the field of Cryptocurrency, you definitely have to acquire a wallet. Just as the name suggests, it is a wallet that stores coins, only this time, digitally. It can be described as a program that keeps hold of both private and public address keys and communicates with blockchains to enable you to send, receive and monitor your digital currency transactions. Here is an overview of Cryptocurrency wallets including how they work and the various types available for use.
How they work
A physical wallet stores money in the form of tangible notes. On the other hand, digital wallets do not store in specific locations; they only store records of transactions. If I send you coins, I basically shift ownership of coins to your address. The public address I input should match your private address for you to be able to claim ownership of the same. If they do match, coins automatically deduct from my address into yours. There is never an actual exchange of coins but storage of such transaction data.
Types of wallets
There are various mediums of storing data, which bring about the existing types of wallets at your disposal.
- Desktop wallet
This type of wallet is the most popular among crypto traders. It is an app that you install on your private computer and will directly connect you to clients’ addresses for you to execute transactions.
- Mobile wallet
It is more or less similar to the desktop wallet, only that this time, you install it on your mobile device rather than your PC.
- Online wallet
Instead of downloading apps, you might opt for this website-based wallet. It uses highly protected servers and also encrypts your private data before being sent to the server.
- Hardware wallet
This one is designed to enhance data security by minimizing the amount of time your wallet stays online. You can plug it in when you want and unplug when done running your errands.
- Paper wallet
This wallet involves printing unique QR codes for both private and public addresses. You can use them to access your data whenever you need to. It is actually among the safest.
Are these wallets safe?
With such business, safety can never be guaranteed at 100%. There have been cases of theft resulting from malicious hacks. Each type of wallet has its security measures. Online wallets, for obvious reasons, are more vulnerable. Remember that if you lose custody of your private address for whatever reason and your coins get transferred, you can never reclaim them. For this reason, you should enhance your wallet’s security. Some of the ways to do so include:
- Regular update of software- updating your software now and then means that you capture all the security enhancements and improved features.
- Beefing up security layers- if you have more layers and complex passwords, a hacker is less likely to work their way into your wallet. Some of these measures include the 2-factor authentication and additional pin code that asks you to input each time you launch the app.
Wallets are evidently the heart of Cryptocurrency. Before you decide on which type of wallet you want to use, you should ask yourself what you need it for. For instance, your plan may be to make daily transactions while another person may plan to buy only once as a form of investment. Such factors will help you decide on the best Cryptocurrency wallet, therefore reducing the risk of attack.