Everything you need to know about Crypto Wallets

Everything you need to know about Crypto Wallets

We use wallets in our daily life to store money. It is a medium that lets us hold currency. Same is the case with cryptocurrency, which also requires a medium to hold cryptocurrency in one place. To achieve that goal, we use digital wallets (a.k.a cryptocurrency wallets).

 

A cryptocurrency wallet is a software that is tasked to store our public and private keys. It is linked with various blockchains which helps us to send and receive money and keep an eye on our balance. It is worth noting that the wallet does not store any coins but enables you to interact with blockchain where the data of all transactions are kept.

 

 

How transactions are made using Crypto Wallets?

 

 

To make a transaction successful, the sender needs to have the receiver’s public address, and then the public key is verified by the system. The network confirms that the public key is of the same user (by looking at the private key) that should receive the coins. Once it is verified, the receiver gets the coin while the sender’s balance is deducted. Finally, your wallet will show you the updated balance.

 

 

How many kinds of crypto wallets are out there?

 

 

Now that we know how digital wallets operate, let us take a quick look at the types of cryptocurrency wallets.

 

Full node walletIt is a type of wallet where you manage your private keys and also host a full copy of the blockchain.

 

Custodial WalletA wallet where you do not control your private keys directly. In most cases, your keys are managed by the exchanges.

 

Desktop WalletA software-based wallet that resides on your computer and lets you manage your crypto balance.

 

Mobile WalletA crypto wallet that is installed on your smartphone in the form of an app.

 

Online WalletA wallet that is not stored locally but resides on a cloud-based server. You can access this wallet from any internet-enabled node.

 

Software WalletAs the name indicates, it includes all the software wallets.

 

Hardware WalletIt is different from the other wallets as it stores data on dedicated hardware which boosts security. The hardware can be a flash drive (USB drive). To make transactions, connect it with any internet-powered device.

 

Paper Wallet – A wallet which contains your public and private keys on a paper in the form of QR code. If you want to make any transaction, you just have to scan the code.

 

Multi-coin walletSince bitcoin, hundreds of new coins have been introduced known as altcoins. So, if you want to hold different altcoins, you need a multi-coin wallet.

 

 

Key points & Conclusion:

 

 

● Wallets do not store your tokens instead it is linked with blockchains.
● Choose a wallet with two-factor authentication.
● There isn’t any wallet that can store all altcoins.
● A cold wallet is not connected to the internet while a hot wallet has an internet connection.
● Don’t misplace your private key. In case it gets stolen you might lose all of your balance.

 

A wallet is necessary to manage transactions. There are different types of wallet each one having its pros or cons. It depends on your requirements and what you want to achieve using these wallets.

 

 

 

 

 

 

 

 

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