A cryptocurrency wallet is a secure digital wallet that is used to store, send and receive digital currencies and monitor their balances. These digital wallets stores private and public keys that are used as access codes for sending and receiving cryptocoins. A cryptocurrency wallet acts as a bank account only that instead of physical keys they have digital keys (private and public keys).
Just like there are different types of cryptocurrencies , there are different types of crypto wallets that are used to safeguard the cryptocoins. Let us have a look at these different types of crypto wallets available in the space today.
- Hot wallets and Cold wallets
Generally, all crypto wallets are categorized as either hot or cold wallet. Hot wallets are wallets that are connected to the internet. On the other hand, cold wallets are wallets that are not connected to the internet or wallets that are offline. Hot wallets are advisable to be used by investors, who access their funds frequently for regular use. Cold wallets are considered more secure and are recommended for storing large amounts of cryptocoins and the best strategy for long-term holdings. Examples of cold wallets include bitcoins stored in USB drives and any hardware wallet.
- Online wallets
An online wallet is a wallet that you access using internet connection. They are provided on the cloud by third party service companies such as Coinbase and Circle. Online wallets can be accessed from any device that is connected to the internet. Some online wallets are able to manage multiple cryptocurrencies and transfer amount between them. Online wallets accept Cryptos such as Bitcoin, Ethereum and Dash.
- Desktop wallets
Desktop wallets are wallets that are downloaded and used on personal laptops and computers at homes and in offices. This type of wallets can be used when there is no internet connection. The advantage of these wallets is that they are available for different operating systems such as Windows, Mac and Ubuntu. Examples of desktop wallets include mSIGNA, Armory and Hive.
- Mobile wallets
Mobile wallets are wallets that are inform of an app in mobile phones. All one requires in order to have a mobile wallet is a smartphone and internet connectivity. Mobile wallets are more practical and easier to use than all other types of wallets and have additional features like QR code scanning.
- Hardware wallets
Hardware wallets are inform of a USB shaped devices that you plug in a computer if you want to make a transaction. They are portable as they are incredibly small and easy to use gadgets. Some hardware wallets require batteries others do not, some have screen that enhance the security of the digital coins such that one does not need a computer to back up the private keys. Hardware wallets are good for storing huge amounts of cryptocurrencies. You can read more about the examples here.
- Paper/ physical wallets
Paper wallets operate offline just like the cold wallets. All you need to do is print your private and public keys on a piece of paper. Unlike other types of wallet, paper wallets have the private and public keys in a physical form, which is the piece of paper that the keys are printed on. When printing the private keys it is advisable, you make multiple physical copies and keep them in a sure place to avoid loss and theft. It is important to note that if you lose the private keys you cannot access your wallet.
- Software wallets
Software wallets are like hot wallets and they require a download of software client in order to create a wallet. Software client is available for both mobile and desktop platforms. Desktop software clients such as Bitcoin core require download of the complete blockchain, which is more than 100GBS in size. This can be a great disadvantage if the gadget of the user has limited space. Alternatively, with software client such as Multibit a person can create a wallet without having to download a blockchain.
There you have it. The above are the different types of cryptocurrency wallets that are available, and are secure and easy to use. All you need to do is choose a wallet that best suits you and get started. Just like the world of cryptocurrency is evolving, cryptocurrency technology is too and will soon be having crypto wallets that have more improved features and capabilities such as accepting debit/credit cards and earning loyalty points through reward programs.