Understand “Cryptocurrency Wallets” in Just 3 Minutes

Historically, the first crypto wallet in existence was that of the developer and founder of Bitcoin himself, Satoshi Nakamoto. The second wallet was created by Hal Finney. All together, Satoshi Nakamoto had sent him 10 bitcoins for a test run. This was the first cryptocurrency exchange to be implemented between two wallets!

What exactly are cryptocurrency wallets?

a Crypto Wallet Crypto Wallet allows you to receive, transfer and above all hold your cryptocurrency. Thus, just as dollars or euros can be placed in a physical wallet or in an online account, it is the same with Bitcoin, Ethereum and other digital currencies in a secure wallet.

In fact, instead of keeping these physical items, The wallet stores the access keys that you use to sign your cryptocurrency transactions It provides the interface that allows you to access your encryption.

How do we distinguish between the different types of cryptocurrency wallets?

In cryptographic terminology, two main families of wallets must be distinguished:

  • The “Hot Wallet” Includes hot storage solutions for private keys. We mainly target software groups (extensions, browsers, etc.) here. Since it is necessarily connected to the internet, it provides a certain vulnerability to hackers.
  • The “Cold Wallet” Compatible with cold storage of private keys via hardware wallets and paper wallets. There is no internet connection making it the perfect solution for securing crypto assets. That is why it is quite possible to leave large sums of money there safely.

Within these categories, there are different forms of storage wallets that cater to very different needs, in terms of security and accessibility.

  • The Web wallet It can be accessed directly via a web browser. One reference in this field is www.blockchain.com. This type of wallet provides increased access, but presents a very high risk of hacking and embezzlement of funds.
  • The “mobile wallet” It can be accessed via mobile phone. This is an app to manage your crypto wallet.
  • The desktop wallet It is the equivalent of a “mobile wallet”, but on a PC. An application will be downloaded to access its wallet. It can also be a web extension, the most famous of which is Metamask.
  • The Hardware Wallet It is an object, often in the form of a USB key (such as a Ledger), that allows you to always keep the contents of your wallet “offline”. A very good way to avoid hacking…as long as you don’t lose it.
  • The “paper wallet” It is a type of paper certificate (QR code). This can limit the basic functions of a crypto wallet such as making transactions, but in exchange for near-inviolable security.

Read also Ethereum (ETH): 5 Key Points You Should Absolutely Know Before Thinking About Investing in ETH

The pros and cons of these wallets

These may vary depending on the shape of the wallet. But we can generalize on the following points:

  • Allows safe storage for many cryptocurrencies.
  • Avoid being exposed to exchange hack, data theft or embezzlement Found in emails, or links in posts on social networks.

On the negative side, we can point out:

  • The initial cost of these digital wallet solutions. Either by purchasing a key, or by billing via web providers or exchanges.
  • Risks of loss, theft or damage to materials.
  • solution Not ideal for traders who step in regularly and trade on a daily basis on cryptocurrencies.

Conclusion: Are Cryptocurrency Wallets Necessary?

without being necessary, Each type of crypto wallet has its own characteristics and benefits. By better understanding all of these categories, investors can determine what best suits their needs.

As usual, to avoid putting all your eggs in one basket, It is highly recommended to diversify your cryptocurrency wallets to protect against potentially costly damages.

💎 Get your free Crypto Watch

Crypto Watch “Quickly Done, Well Done”: Every Friday at 8 PM, get our free Crypto Watch in your email inbox. 100% value added, 0% spam!

Leave a Comment