When operating with cryptocurrency, you must use crypto-wallets. From their name, it’s easy to tell that they’re pretty essential for crypto exchanges and other blockchain-related businesses. However, getting one might not be a straightforward process.
This post explores several types of crypto wallets. Learn their meaning, importance, and ways to obtain the wallet to perform crypto exchanges.
These are physical devices or software programs that allow you to save, send or receive digital currency. Such wallets are similar to online bank accounts for real money transactions.
However, there is one significant difference; they don’t have the backing of government deposit schemes. They’re independent, store digital money, and give you absolute control of your currency.
Two key pairs make up a crypto wallet: private and public. The latter is generated from the private one and is used to perform financial exchanges.
Diverse blockchains necessitate the use of unique wallets. MetaMask is one of the most widespread wallets and supports only a few networks, including Ethereum and Binance Smart Chan. Others can hold Bitcoin and other digital money.
For individuals with a sizable amount of crypto, a non-custodial wallet is essential. It only becomes “custodial” when a third party manages the wallet owned by another. This usually happens in large organizations that utilize a huge amount of digital money or when you’re using an exchange.
Crypto wallets are not the exact location of your digital currency. They’re only places where you keep the keys that provide access to your money. This is because your crypto exists on the blockchain and not literally inside the wallet.
Your keys serve as proof of ownership of your digital currency and enable you to conduct transactions. However, you lose access to your money if you lose your private keys. That is why it is critical to safeguard your hardware wallet or utilize a reputable wallet service.
Crypto wallets also make it easier and safer for freelancers who have found a crypto work getting paid in Bitcoin and other digital currencies. You only need to provide your wallet address to receive your funds. In addition, you can make fast and easy payments to other wallet users in the same vein.
These wallets fall into two categories based on their function: Software and Hardware.
A software wallet is a computer program or a mobile application that securely stores private keys. While hardware wallets handle numerous currencies, the software is designed specifically for a unique cryptocurrency.
There are three distinct types of software storage wallets. These are:
Mobile-based software wallet
Web-based: These versions are hosted by an online exchange where you can buy and sell digital money. The wallet providers keep the keys to this storage, not you. For instance, if you buy crypto with Coinbase Global, the platform stores the keys in a wallet. These wallets are always connected to the internet and are called “hot storage.”
The downside of this storage process is the vulnerability to malicious operations. But, aside from this, it’s the most convenient method of trading crypto.
Mobile Software wallet: They run on a mobile device like a phone or tablet. Some of these apps don’t host your private key, so you’ll have to save and manage it yourself. Also, since they can be linked to an exchange, mobile wallets frequently allow “hot” storage. Still, some may give additional protection with “cold” (offline) storage options.
Desktop wallets: Like its mobile versions, a desktop wallet is a software for PCs. It also offers cold storage solutions that serve as an additional security layer.
A hardware wallet allows you to store your cryptos on a piece of hardware that’s not accessible online. To simplify transfers and exchanges, users can link a wallet to a computer via a USB or another connection. But these devices are mostly used to keep cryptocurrency out of plain sight.
You’ll need to keep track of your security keys yourself, but it provides the highest level of security.
Before getting a wallet, you must purchase the digital currency on an exchange. After that, you must decide how you want to keep them safe. After selecting a blockchain wallet, you’ll have to create an account.
Creating an e-wallet is free, and the process takes place online. Individuals must provide a valid email address and password for the account. Afterward, the system will automatically send an email seeking verification of the account.
You must create security keys, which it's best to store safely. Specific wallets platforms may support two-factor verification for added security. The same is true if you decide to use a mobile, desktop, or hardware wallet.
The following step is to transfer cryptos from the exchange to your wallet. For instance, if you purchased through Coinbase, there’s a “send” option. Users must select the option; input the wallet’s address and the money they intend to transfer.
If you’re merely looking for a place to store your crypto assets, then several free blockchain and crypto wallets are available. However, some charge customers for particular transactions, crypto staking, and consultancy work.
While many individuals are unfamiliar with the concept of cryptocurrency, crypto wallets are usually user-friendly. Therefore, all wallets are easy to use. So, you can easily opt for a software wallet and store your money online or a hardware option for offline storage.