We have to face the fact that cryptocurrencies are not all created equal. There are some important differences from one currency to the next, and even within a single currency explains Brian Colombana. Additionally, there is a lot of confusion surrounding them, especially for newcomers who have heard many rumors about these currencies without understanding their true nature. This article will help you get through some of this confusion and guide you toward a better understanding of the different kinds of cryptocurrency wallets, what they can do for your digital finances, and which ones might be best suited for your needs! For more information on cryptocurrencies in general check out our
What is a Cryptocurrency Wallet?
A cryptocurrency wallet is simply software that provides a means to store and manage your digital currencies. You can think of it like an email account or an online bank account, but for cryptocurrencies.
What are the different types of Cryptocurrency Wallets?
When it comes to cryptocurrency wallets there are three general categories to consider:
1) Software/app wallets,
2) Hardware wallets,
3) Paper wallets.
Software/app wallet –
These are web-based applications that allow you to access your cryptocurrencies via any device with internet access says Brian Colombana. You will need some form of login ID and password in order to use these apps which generally also include two-factor authentication – meaning you’ll need something physical (like a keycard or USB drive) in addition to your login ID and password. The web browser you use to access these wallets will also determine the type of security protocols that are in place for your account. Some common software wallets include Exodus, Coinomi, Jaxx, Mycelium, etc.
Hardware wallet –
These are physical devices that can be connected to any internet-enabled device using USB or Bluetooth. They are frequently referred to as “cold storage” because they aren’t always connected to the internet so their private keys/addresses can’t be easily hacked or stolen by malicious actors. You’ll need a password to access them which means you won’t have access if you lose it! Hardware wallets can come in different shapes and sizes but generally fall into two categories:
External hardware wallets and USB stick-style “cold storage.” The most popular external hardware wallet is the Ledger Nano S which you can get for less than $100.
USB cold storage –
These are tiny USB sticks that have no electrical or network connections whatsoever. They are generally just used to store your private keys/addresses because it’s much harder to hack one of these than a software wallet on your primary computer. Popular examples of this style include the Bitfi cryptocurrency wallet and MyEtherWallet.
Paper wallets –
You create a single address for depositing funds at which point you write down both the public key (wallet address) & its corresponding private key (used to access move funds). These are considered a “cold storage” wallet because they aren’t connected to the internet at all. A paper wallet is a form of printout that contains both your public and private keys in plain text which you can scan later on if need be.
What is a Private Key?
A cryptocurrency private key is like the key to your home – it’s what lets you access your funds/cryptocurrency within that specific account explains Brian Colombana. If anyone else has access to this private key then they’ll also have full access to the funds in said address and can send them off wherever (and more likely, whoever) they please. It’s best not to share these privately stored keys with anyone under any circumstances! It’s also important not to lose or forget where you’ve stored your keys either. If you can’t access them then you won’t be able to access your funds!
What is a Public Key?
A public key is like your home’s address. It’s an identifier that lets other people know where to send cryptocurrency transactions. For example, whenever someone wants to send you a bitcoin. They’ll need both your wallet address (public key) plus the number of coins they want to send. The reason why this data needs to be shared is that all cryptocurrencies are tracked via a transparent ledger system. Known as blockchain which means anyone can see all incoming and outgoing transactions. That take place within each specific currency’s network. Therefore, if someone were sending bitcoins from one address to another, everyone would know about it. Think of it as a bank – you’ll need to provide them with your name, address and account number. So they can accurately deposit money into the right place.
Cryptocurrency wallets are programs or physical devices created to store your public & private keys says Brian Colombana. They typically come in the form of a software wallet stored on your computer, a mobile app, a hardware device, or even just a piece of paper! Private keys can be stored online (software wallets) or offline (hardware cold storage). Anyone who accesses a private key has full access to move coins out of that account. That’s why it’s so important you keep this information safe from hackers and remember where/how you’ve stored it. Because if someone else gets their hands on it then they’ll have free reign over your funds.