What is a Crypto wallet? – 101
A crypto wallet is a piece of software or application that allows cryptocurrency holders to store and use their digital assets. A wallet stores your assets and provides you with the ability to send and receive from other wallets via a unique wallet address.
A wallet also provides the security of your assets, protecting them with security keys, ultimately you will protect your assets with a password.
One of the most important decisions to make is where you will store or hold your crypto assets. This decision should take into account whether you want regular access, or primarily to secure and lock away for a number of years. Finding a secure and reliable place to store your digital assets is very important.
Types of Crypto Wallets
There are different types of wallets, and the type you decide to use depends on your needs, budget, and preference. There are two main categories of wallets which are hot wallets and cold wallets.
Arguably this the most popular type of crypto wallet. Hot wallets are digital crypto wallets connected to the internet and are available online, and/or can be accessed on your smartphone. These wallets are popular because they are the most affordable.
Hot wallets come in two forms, web wallets and mobile wallets. Web wallets are mostly provided by crypto marketplaces. For example, Paxful offers a free Bitcoin wallet when you create an account with them. The wallet can be accessed through a web browser or mobile. Mobile wallets, on the other hand, are wallets that can be installed on smartphones. They are convenient and easy to use. They are the most preferred for those who use crypto for peer-to-peer payments, buying online, paying bills, and transferring among other things. Because hot wallets are accessible online, they are more susceptible to those that wish to steal crypto holdings.
Cold wallets come in physical devices that can’t be accessed via the internet. These hardware wallets come in portable devices such as USB flash drives or other external devices. They do not require any internet connection, hence are considered more secure. However, you can still lose it to theft, only a strong password can still secure your crypto coins.
Other types of cold wallets are desktop wallets, which are installed on a desktop or personal computer, giving the owner full control and access to their digital assets. Lastly is the paper wallet, which is a piece of paper where your private details to your wallet are printed out. Considered the riskiest form of cold wallets, because you can lose the paper in many ways. However, they are completely free of any form of malware.
Choosing a wallet is your personal choice however you should take into account your requirements. We mentioned the consideration of easy access versus locking it away. How you use your crypto assets plays a big part in what type of wallet you wish to use.
Many holders of bitcoin choose to lock away their assets for a number of years, some choose to do this via a hardware device as it provides further security. When using such cold storage devices ensure you also secure your password as without this you will lose access to those assets, there is no password reset.
If you sell, buy or move around crypto assets frequently you are more likely to use hot wallets as it provides you the functionality to go about your day to day business.