If you want to use cryptocurrency in any way, you need a cryptocurrency wallet. What it is – will tell you in a short cryptocurrency wallet guide.
How Does a Cryptocurrency Wallet Work?
First of all, it is important to understand that cryptocurrencies are digital assets. They do not exist physically and do not lie in any particular place. There are only transaction records stored on the blockchain. That is, a crypto wallet does not store your funds in the literal sense of the word.
The ability to access funds and the ability to perform any actions with them are provided by public and private keys.
A cryptocurrency wallet is special software that stores your keys and interacts with blockchains. When someone sends you digital currency, they sign the transfer of ownership of the coins to your wallet address. To unlock funds and manage these coins, the public and private keys must match. If they match, the balance of the recipient is increased and the balance of the sender decreases. We repeat: there is no physical exchange of coins, just a record of a new transaction is added to the blockchain.
Types of Cryptocurrency Wallets
There are several different types of wallets for storing and accessing digital assets. First of all, there are:
- Software wallets;
- Special devices;
- Paper carriers.
Software wallets can be presented as an online client, mobile application, or computer software.
- Desktop software. Such programs are installed on a computer or laptop. Access to your funds is possible only from the device on which it is installed. The desktop wallet is considered one of the most reliable, however, its potential vulnerability depends on the degree of security of your computer.
- Online client. Cryptocurrency storage services are provided by many cryptocurrency exchanges. Because they run in the cloud, your funds are available from any computing device. It is really convenient, but there is a risk of losing funds due to hacker attacks or illegal actions on the part of the site owners.
- Mobile applications. They are installed on your phone and your wallet will always and everywhere be with you. This is convenient if you often pay with cryptocurrency for purchases, including in retail chains.
- Hardware devices. They combine maximum security for your funds and mobility. Private keys are stored on an offline device. If it is necessary to perform any operations with cryptocurrency, the device is connected to a computer or any other device with Internet access. Such devices are compatible with different software, different web interfaces and can support several types of digital assets.
- Paper carriers. The term itself refers to the software that generates keys and to physical copies of keys printed on paper. The transfer of cryptocurrency to a paper wallet is performed by transferring funds to the public address specified in the wallet.
Where Is It Better to Store Funds
The cryptocurrency market is growing and developing, accordingly, new programs, services and devices for storing digital assets appear regularly. First of all, you need to decide on the goals, and then it will become clear: you need the best cryptocurrency mobile wallet or you should give preference to the hardware one. So your goals are:
- Are you planning to pay regularly for your purchases?
- Do you plan to invest and accumulate funds?
- Is it important for you that your funds are always at hand?
- Are you planning to use one cryptocurrency or several?
For storing large amounts and investment purposes, it is better to choose a desktop or hardware wallet. If it is important for you to have a relatively small amount at hand for small expenses, then you should pay attention to the mobile or online versions. Perhaps the most convenient is still a hardware wallet, which optimally combines mobility and maximum security of your funds.