With all the news surrounding cryptocurrencies and their widespread adoption, one term that often comes up is “cryptocurrency wallet.” But what exactly are they, and how do they work?
While the term is self-explanatory in itself, gaining a deeper understanding of how these wallets work, their various types, and their functionalities can significantly enhance your ability to manage and safeguard your assets more effectively than other wallet holders.
Let’s dive in.
What is a crypto wallet
A crypto wallet is a digital container used to store cryptocurrencies. When a user creates a new wallet, they are assigned a unique private key.
These private keys are alphanumeric strings of code that encrypt data and provide access to a users’ holdings. If someone gains access to your private key, they can instantly take control of your assets.
This has prompted companies worldwide to invest in new and innovative ways to secure users’ private keys. Today, there are various types of cryptocurrency wallets, each offering distinct features and, in some cases, differing levels of protection against malicious attacks.
Types of cryptocurrency wallets
Paper Wallets
Paper wallets are easy to set up and are very cost effective compared to other types of crypto wallets. To set-up a Paper wallet you want to start off by generating a unique private key using a trusted key generator like bitaddress.org.
On bitaddress.org you’ll find a text box inside a big text field. Type random letters or numbers into the text box or move your cursor around the text field to work the randomness percentage to 100%.
The system should automatically generate new public and private keys, along with their corresponding QR codes, and provide an option to print the page. Print the new page and create a few copies for storage.
It’s important to note that the security of a paper wallet relies entirely on how well the owner protects it. Anyone who gains access to your paper wallet automatically has control of your tokens.
Hardware Wallets
Hardware wallets are physical devices that are built for the sole purpose of storing cryptocurrency private keys. These hardware devices store users’ private keys on secure chips and are usually designed to operate offline.
Examples of hardware wallets include Tangem cards, Ledger Nano X, Trevor Safe 5, Ellipal Titan, SafePal etc.
Software Wallets
A software crypto wallet is a digital application that provides an easy-to-use interface for users to store, send, and receive cryptocurrencies on their smartphones or computers. These wallets are generally more practical and offer a broader range of features when compared to other types of crypto wallets.
Examples of software wallets include Trust Wallet and MetaMask Wallet.
Disclaimer
This blog does not offer financial or investment advice. Any content shared here is based on personal opinions and experiences and should not be considered as a recommendation to invest or trade in any assets. Consult a licensed financial advisor for guidance. Please see our full disclaimer here.
