Cryptocurrency Wallets : Everything You Need To Know in 2022

What is a Cryptocurrency Wallet ? How They Work ?

Cryptocurrency Wallets : Everything You Need To Know

What is a Cryptocurrency Wallet?

If you are going to use any type of digital currency, the first thing you’re going to need is a cryptocurrency wallet.

A cryptocurrency wallet is a program or service based on cryptographic public and private keys.

Public keys are used to receive payments while private keys are used to spend them.

Apart from sending/receiving money, digital wallets are constantly improving their functionality by adding new features.

Plain Cryptocurrency Wallet

This is the simplest form of a digital wallet.

Cryptocurrencies aren’t stored in it. They are stored in the blockchain.

It is only used to send and receive payments from the blockchain.

Multisig Wallet

Multi-signature wallets add another layer of security to the simple cryptocurrency wallets by requiring multiple parties to sign a transaction.

Two or more people can control funds in a multi-signature wallet.

Cryptocurrency Wallets : Everything You Need To Know

Types Of Cryptocurrency Wallets

  • Software Wallet (Hot Wallet)
  • Hardware Wallet (Cold Wallet)
  • Paper Wallet

Software Wallet (Hot Wallet)

Software wallets aka hot wallets are always connected to the internet and are readily accessible.

These wallets can are mainly useful if you’re going to trade cryptocurrencies on a daily basis.

Types Of Hot Wallet

  • Web Wallet
  • Desktop Wallet
  • Mobile Wallet
Web Wallet

Web wallets are mostly provided by cryptocurrency exchanges such as Binance, Poloniex.

All you need is a web browser to access a web wallet.

They are usually free to use but they come with high-security risks as they are the first choice of the hackers to steal from.

I recommend you choose a web wallet that lets you take complete control of your private keys. Myetherwallet is a better web wallet than these exchange wallets.

Desktop Wallet

Desktop wallets are programs/software that can be installed on different operating systems such as Windows, macOS, or Linux.

Desktop wallets provide a better level of security than web wallets. However, you need to make sure that your desktop has an anti-virus and firewall installed to keep those coins safe.

Electrum, Exodus are popular choices.

Mobile Wallet

Mobile wallets are installed on smartphones and are similar to desktop wallets.

They are the most widely used type of wallet. Easy usability, QR Code scanning for faster transactions, and few more features make them better choices than desktop wallets.

Every cryptocurrency has its own wallet.

Jaxx, Mycelium, Electrum, etc must be your #1 priority.

Hardware Wallet (Cold Storage Wallet)

These wallets are hardware devices that are not connected to the internet. You can connect them to a computer or smartphone via USB and use them.

They are considered the most secure type of wallets because the only way to steal them is by physically stealing the wallet. Since cryptocurrency provides a high level of anonymity, it is even more difficult to steal them.

They are also the expensive ($50 – $150) option.

Ledger, Trezor lead the hardware wallet sector and offer the highest level of protection to your cryptos at the same time.

Paper Wallet

In a paper wallet, you print your public and private keys on paper.

They are a bit technical type of wallet and need to be used very cautiously.

Also, keep in mind, if you lose paper on which keys are printed, your coins are lost forever. That’s why only advanced users should use paper wallets.

Which Wallet Should I Use?

If you’re going to invest a good chunk of money to buy and hold cryptocurrency, I recommend you use hardware wallets as they provide you the highest level of security.

If you are going to send or receive cryptocurrencies more often, then use a mobile or desktop wallet because you can add many levels of security on them like 2FA, OTP, etc.

Never keep your coins stored on a cryptocurrency exchange as they store your private keys online. They are also most prone to attacks by hackers.

Choose the type of wallet that best suits your needs.

That’s it.

If you have any questions, ask me in the comments below.

If you have any suggestions, send me an email via Contact Form.

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