A traditional wallet is where you keep your valuable items such as cash, credit cards, and…, but when you use the cryptos, you’re gonna need a new type of wallet to go with it: a cryptocurrency wallet. But what kind of wallet is this and how to find the best cryptocurrency wallets?
In this post, I walk you step-by-step through understanding and choosing the best crypto wallet and learning more about its types.
What Is a Crypto Wallet ?
A cryptocurrency wallet is a software program that helps manage your digital money. With a cryptocurrency wallet, you can not only store the value of your digital money but also send and receive currencies. Additionally, you can monitor your balance the way you’d do with your banking account.
Types of Crypto Wallet
The wallets can be categorized based on the method and location of storage and considered as follows:
- Hot and Cold Wallets
- Paper Wallets
- Hardware wallets
- Mobile Wallets
- Desktop Wallets
- Web Wallets
Hot and Cold Crypto Wallet
A wallet that isn’t connected to the internet is a cold crypto wallet. on the other hand, hot wallets are connected to the internet and thus are less secure. Hot wallets pose more risks but are user-friendly, especially for beginners.
Paper Crypto Wallet
This kind of wallet is a super cold crypto wallet and physically printed QR-coded form wallet. to use it, you can send funds by transferring the money to the wallet’s public address, and you can withdraw or send your currencies by entering your private keys or by scanning the QR code on the paper wallet.
A hardware wallet is a crypto wallet that stores the user’s private keys in a secure hardware device. Hardware wallets are the most expensive type of wallet.
Also, they aren’t user-friendly, especially for beginners. it is important to know that paper wallets are safer than hardware wallets, which I talk about it in the past section.
Mobile Crypto Wallets
Mobile wallets are apps that allow you to store, send, and receive your cryptocurrency from your device. they can be safer than online wallets and offer additional features such as QR code scanning. But, the risk of losing crypto assets if your phone is lost or damaged is high.
Desktop Crypto Wallet
As the name suggests, desktop wallets are installed on a desktop or laptop computer and provide the user with complete control over the wallet. it’s a convenient choice that you can download and install on your computer. However, If you don’t back up your computer and it dies, you lose your cryptos.
Web Crypto Wallets
Web wallets store your private keys on a server, which are constantly online and controlled by a third party. The main advantage of web wallets is that they can be accessed anywhere as easily as checking your message on your phone. However, security is a major concern.
How a Crypto Wallet works
First of all, it is important to know that crypto wallets don’t actually store the cryptocurrency itself; rather, they store the cryptocurrency’s private and public keys.
As you may know, a crypto wallet consists of two key pairs: private keys and public keys. A public key is derived from the private key and serves as the address used to send crypto to the wallet. These keys are something like the PIN code you use to access your bank account.
This mechanism makes the security of wallets too high and there is a very low chance that somebody else can get your funds by mistake. To give you an example of what a cryptocurrency address looks like, here is the wallet address believed to belong to the creator of Bitcoin, Satoshi Nakamoto!
Public key: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa
As you can see, it uses a combination of numbers and letters, both uppercase and lowercase. In general, you do not need to memorize these types of addresses and you can save them on your personal computer to use when needed.
On other hand, a private key does the job of a unique individual password to your individual crypto wallet address. you have to keep it in a completely safe place because if you lose it, you will not have access to it anymore.
If somebody has access to it, they will have all the control over your crypto wallet. Here is an example of what the private keys look like:
Private key: 03bf350d2821375158a608b51e3e898e507fe47f2d2e8c774de4a9a7edecf74eda
These two kinds of addresses look completely different, but the software technology knows that they are specifically linked to each other. That proves that
you’re the owner of the coins and allow you to transfer funds.
Top 3 Crypto Wallets
Depending on your cryptocurrency needs and goals, you may choose a different kind of crypto wallet. In the world of digital currencies, the following popular wallets can be introduced based on security, transaction fees, and anonymity.
Exodus is a desktop and mobile wallet with a very simple user interface and an exchange built-in. It offers 138 cryptocurrencies for crypto-to-crypto, peer-to-peer swaps. It is necessary to know that this wallet is great for beginners just getting into the crypto space.
Ledger Nano X
The Ledger Nano X is one step ahead of other hardware wallets. The increased capacity for coins, combined with its Bluetooth connectivity makes it a powerhouse for managing crypto assets. This wallet resembles a USB drive and connects to your device via USB or Bluetooth. With Ledger, you can connect the wallet to your device and do not need a computer.
Electrum is one of the original Bitcoin wallets. It has been around since 2011, two years after Bitcoin’s creation. this wallet is open source and allows its users to set custom transaction fees, and has the option to choose between legacy Bitcoin and Segwit.
In the Cryptostone ecosystem, you can use its crypto payment gateway on your website to provide an alternative payment method for your customers. With centralized exchange, you can trade easily and anonymously in a safe way and with the decentralized exchange, you can launch your exchange and trade in a fully decentralized and peer-to-peer way.
Also, decentralized Worldwide Stock Market is another platform in the Cryptostone project that is provided to facilitate fundraising events to customers, which makes the fundraising and investment process inclusive and accessible based on decentralized listing and delisting by blockchain consensus.