As the crypto world expands, there are certain things that are required if you’re to easily enjoy the benefits of these assets. Wallets are definitely one of them. Whether you are a beginner or an experienced investor, understanding what crypto wallets are and how to choose the right one can significantly enhance your security and usability.
So, what are wallets and how do they work? Let’s find out!
What Is a Crypto Wallet?
Put simply, a crypto wallet is a digital tool that allows you to store, send, and receive cryptocurrencies.
Whenever you need to hold cash, you get a physical wallet. However, unlike the physical ones, crypto wallets don’t actually store your coins.
So, what do they store? Well, to really understand what a crypto wallet is, you need to be familiar with two things – private and public keys:
- Public Key: The public key is basically your wallet address. It’s that long, alphanumeric combination you send to someone who wants to send you crypto – just like your bank account.
- Private Key: This is essentially your crypto wallet’s password. It’s like the password to your mobile banking app – and just like your mobile banking password, you need to keep it secret.
On their own, crypto wallets focus on storing your private keys. Most people believe that your wallet stores your coins, but this isn’t true – your coins are actually stored on the blockchain. Instead, your wallet focuses on protecting your private keys and ensuring that no one can access them – and, by extension, your coins – besides you.
Types of Crypto Wallets
Crypto wallets come in various forms. But, they are broadly categorized into two main types: hot wallets and cold wallets.
Hot Wallets
A hot wallet is a crypto wallet that is directly connected to the internet. These wallets are perfect for people who want to make frequent transactions, as they facilitate quick and seamless transfers.
However, the fact that they are connected to the internet also means that hot wallets are more vulnerable to attacks. So, it is important for you to protect your wallet password (or private key) from unauthorized access.
Examples of hot wallets include mobile wallets, desktop wallets, and web wallets. This means that your Exchanger101 wallet is a hot wallet.
Cold Wallets
Cold wallets are the exact opposite of hot wallets. They aren’t connected to the internet, so it is impossible for them to be hacked or breached.
But, this also means that cold wallets aren’t convenient for frequent transactions. So, if you need to quickly send or receive crypto, a cold wallet won’t work for you.
The major examples include hardware wallets and paper wallets.
How To Choose A Crypto Wallet
When choosing a crypto wallet, it’s important to consider some of the following factors to ensure it meets your needs:
- Security: Look for features such as two-factor authentication (2FA), encryption, and backup options. Fortunately, your Exchanger101 wallet offers all of these features.
- User Interface: A user-friendly interface is also critical, especially for beginners. We recommend that you choose a wallet with intuitive navigation and clear instructions.
- Supported Cryptocurrencies: Ensure the wallet supports the specific cryptocurrencies you intend to store.
- Compatibility: Check if the wallet is compatible with your device or operating system.
- Backup and Recovery Options: The ability to back up and recover your wallet in case of loss is essential.