Do I Need a Cryptocurrency Wallet?

Most investors will find that when it comes to trading cryptocurrencies, they also need to make other investments to keep their assets safe. One way to do this is to purchase a cryptocurrency wallet that stores the keys in a safe place. Having a secure cryptocurrency wallet functions much like a regular wallet except that the currencies and wallet contents can be hacked through digital means.

Additionally, having a wallet can allow users to perform various transactions while keeping an eye on their balance. Those who don’t want to invest in wallets often turn to bitcoin debit cards for their bitcoin storing needs. Debit cards are lightweight and serve as a more concentrated form of a crypto wallet.

If you’re interested to learn more about crypto wallets, here are some facts for you:

How do cryptocurrency wallets work?

Cryptocurrency wallets are special software programs that work with various blockchain networks. Blockchains are digital ledgers that store the entire history of a crypto coin including its various transactions. Crypto wallets work by allowing you to move funds around these blockchain networks while also giving you a chance to view your account details.

In order to perform various transactions, you’ll need to verify your address via a private key that comes in a set of specific codes. The speed and security often depend on the kind of wallet that you have.

What are the different types of crypto wallets?

There are various types of cryptocurrencies, which provide different means of storing your keys and accessing your account. Hot wallets are easily accessible because they’re connected to the Internet, whereas cold wallets are offline storage. They can be divided into different categories, namely:

1. Software wallets

Software wallets are hot wallets as they’re often connected to the Internet. These are wallets that run on a specific program that allows easy access. Some examples of software wallets include:

• Desktop wallets – This type of wallet is a software that is installed in the user’s computer. Users can only access their account on the platform the software is downloaded into, ensuring privacy. However, there are some risks involved, such as the presence of computer viruses that can affect the amount of funds you’re storing and your private account details.
• Mobile wallets – These are wallets that are run through a mobile application, which you need to download to your phone. Most people use mobile wallets when shopping for items in stores that accept cryptocurrencies. Unlike desktop wallets, these wallets have a much smaller storage space.
• Online wallets – These wallets operate on a cloud and can be accessed on any computer device at any location provided that you have a stable Internet connection. In spite of them being convenient and being used to buy items, they are still vulnerable to third-party attacks, especially if you access your account using a public Internet connection.

If you’re the type who mainly uses cryptocurrency for online transactions or trade, then you should get a hot wallet or software wallet.

1. Hardware wallets

Hardware wallets differ from software wallets in a sense that they store a user’s private keys in a hardware device such as a flash drive. While hardware wallets can be used to make various online transactions, their main purpose is to store your data offline to avoid invasion of privacy. Many hardware wallets include features that are compatible with various interfaces, making them easy to handle.

A hardware wallet is considered to be the most expensive type of wallet but also the hardest to hack. You only need to attach your hardware wallet to your desktop computer or laptop when you’re doing transactions and then remove it when you’re done.

1. Paper wallets

These types of wallets include a particular software that can be used to generate your keys and print them. Their other functions include transferring your funds to the address and moving your assets to your desktop wallet. To do the latter, users will need to manually enter their keys or scan the code included in the wallet.

Each wallet contains a specific function that caters to an owner’s lifestyle and purpose. However, to increase your overall security, consider taking these extra steps:

• Backup your wallet – Store your coins on different platforms and make copies of your private keys.
• Regularly update your software – If you’re using software wallets, regularly update them to the latest version to make use of their security enhancements.
• Instill practical security measures – This includes not accessing your wallet using a public Wi-Fi, using long passwords that you only know, and enabling permission settings for notifications.

Which cryptocurrency wallet works best for me?

With so many wallet options to choose from, there is no direct answer as to which wallet works best for you. To narrow your options, take a closer look at your lifestyle and investment purposes and then ask yourself these questions:

• Do you need cryptocurrency to spend or just to save? If you’re intending to spend, then go for hot wallets, but if you’re going to save, then go for cold wallets.
• Do you intend to invest in several cryptocurrencies or just one single type of crypto coin? If you have several cryptocurrencies, then use a combination of hot and cold wallets, but if you have only one type of crypto coin, then use a crypto wallet such as a Bitcoin wallet or Ethereum wallet.
• Are you going to store more cryptocurrency than you’re going to use? If yes, then go for cold wallets such as hardware wallets or paper wallets.
• Are you willing to spend for a wallet? If not, then use the hot wallets provided by trade platforms. If you are, then look for the best kind of cold wallet with high-security features.

These questions help narrow your options so you don’t have to confuse yourself when making a purchase.

Conclusion

Cryptocurrency wallets are a great investment. To make the most of their features, experts recommend users should invest in more than one kind of wallet to keep their assets safe. This is especially useful when you’re dealing with different kinds of crypto coins that contain different features and value.