Cryptocurrency wallets are just like bank accounts where you save your real legal tender or cash. Besides using your bank account, you also have your wallet or piggy bank. Irrespective of what you choose, your cryptocurrency wallet should be safe, reliable, and easily accessible. Learn the basics about cryptocurrency wallets.
What is a Cryptocurrency Wallet?
It’s common knowledge that digital currencies are different from physical cash. This same principle applies to storing cryptocurrencies. Blockchain technologies allow a different kind of storage system. Hence, coins are stored in wallet addresses which are synonymous to bank account numbers. These addresses are accessed with public and private keys, and the identities of addresses are always hidden. Some well-known wallets include TREZOR, EthereumWallet, Coinbase, Bitcoin Core Wallet, Litecoin Core, and more. A wallet address is usually a combination of numbers and letters (upper and lower case), and a user can have more than one address. Unlike with bank account numbers where nobody knows your account balance, in the blockchain, all peers have access to the amount of funds in a wallet, but they have no idea who the funds belong to. Nonetheless, peers can always transfer coins into your wallet using your address. Thus, cryptocurrency wallets are responsible for handling your crypto transactions including transfers and payments. Every wallet has its own address, and that’s why you find several wallets around.
Why Do People Need a Cryptocurrency Wallet?
The same way you need a bank account and a unique bank account number to carry out cash transfers and online payments, you need a cryptocurrency wallet to do everything that involves coin transfer and payment. People depend on wallets because they are secure, fast, and portable. Many wallets can be accessed on the go, and they are often easy to use. Even though you may not fully understand their technical operations, rest assured that your coins are protected.
How Do Cryptocurrency Wallets Work?
If you still believe that crypto wallets keep your funds directly on them, you’re wrong. The wallet address is your access to the blockchain being used by a cryptocurrency, and your pass is your private and public key. With the private key, you can access your funds linked to a particular coin while the public key is a more secure version of the private key which prevents your wallet from being hacked. The ledger on the blockchain records all the transactions that take place on the blockchain, and when you enter your private key, you identify yourself as the owner of certain funds on the blockchain.
WhatTypes of Wallets Exist?
The variety of wallets available makes it possible for you to select your preferred wallet. The most popular types of wallets include:
- Desktop Wallet – This can only be accessed on a desktop or PC.
- Mobile Wallet – This can be downloaded as an app on a mobile device and can be used to make payments even in real life shops.
- Hardware Wallet –This remains the safest wallet since it is a physical device, requires no internet access, and cannot be hacked.
- Paper Wallet – This wallet is a printed version of your private and public keys and can only be accessed from the paper itself.
- Online Wallet – Most crypto exchanges allow investors to store coins in their online wallets. Although this type is convenient and easy to access, its level of security is low and hack is highly possible.
All cryptocurrencies have their positives and drawbacks; yet, it’s important that you thoroughly go through the different options before selecting your preference. In fact, cold storage wallets are the most preferred. The factors that remain significant irrespective of your choice are security, convenience, and functionality. With these in place, your coins are safe!