Congratulations, my friend, you’re finally onboard the crypto-revolution after some skepticism.
How does that feel?
Alright, now remember to store those crypto coins you bought in a wallet. Duh.
Also, don’t forget to keep your private key all safe and secure.
Otherwise, that 32 Watt smile will soon turn into a frown.
Now we don’t want that to happen.
Do we, my friend?
I thought so as well.
And it is for this reason that this post on the different types of crypto wallets exist. Apart from that keeping yourself well-informed is good for reducing your stress levels. Now let’s dive in so that we can keep that investment of yours all warm and fuzzy in its respective place. Then buy a Lambo. .Lol.
And we’re going to begin with …
What is a bitcoin wallet:
A bitcoin wallet is a software program where you store all your precious babies i.e. Bitcoins.
Through this wallet you can interact with the bitcoin blockchain and learn about your transaction history. However, technically speaking bitcoins aren’t stored anywhere.
Then where are they kept?
There are 2 keys associated with every wallet that you may encounter in your crypto career. They’re a private and a public key (consisting of a long string of secret numbers). The public key displays the address of your wallet to the entire world. This means that via the public key the entire world will come to know this address belongs to this wallet.
However, only the owner of the private key will be to access the funds stored in his wallet.
In short, Public key: displays your address to the world. Private key: Helps you access the funds in your wallet.
Getting back on track you need a wallet for sending and receiving cryptocurrencies. Thus, exists a bitcoin wallet. For facilitating trade and storing of Bitcoins along with offering you complete ownership over your funds.
How does a wallet work:
As mentioned earlier a wallet is a user interface that allows you to interact with the blockchain. It consists of a public and private key and allows you to store, send and receive cryptocurrencies. Through this wallet, you can see your history of transactions within the blockchain.
Also, you may select any wallet depending on your preferences in terms of safety, privacy, features, medium (online or offline), etc.
So that’s how a wallet works in general.
How to send and receive money into your crypto wallet:
Now that you have stored your cryptocurrency in a wallet of your choice it’s time to indulge in a few transactions.
As everyone is aware that transactions involve sending and receiving of whatever is being traded, let’s explore how this is made possible through crypto wallets.
If you wish to receive cryptocurrencies in your wallet then you have to give your public key to the person with whom you wish to transact.
How this happens is that you send him your public-key and she/he sends the required bitcoins, etc to that address, etc.
Moreover, if you want to send cryptocurrencies to your beloved or someone else then you need to flip the receiving process.
So now you’re the one sending the coins via your private key to the public address of another person. She/He is the receiver and you’re the giver. Pretty cool.
Alright, I assume that now is the perfect time to learn about a vital element about crypto wallets i.e. public, private and seed keys.
What are private keys, public keys, and a seed key:
A public-key is a long string of alphanumeric characters that is used to encrypt data.
It displays the address of your wallet to the entire world. This means that via the public key the entire world will come to know that this address belongs to this wallet. Through your public key, you can receive bitcoins or other altcoins of your choice in your crypto wallet.
On the other hand, a private-key is another string of 51 alphanumeric characters that allows you to access the funds in your wallet. Lose or forget this and it’s game over for that wallet. Now time to set-up a new wallet and store coins, send and receive through this wallet.
In short, Public key-displays your address to the world. Private key: Helps you access the funds in your wallet.
Alright, after going over public and private keys let’s look at what is a seed key.
It’s a human-readable representation of your wallet. This is very important because it’s used to regain access to your wallet in case you lose access to your public and private keys.
What is the difference between hot and cold wallets:
Before we begin exploring the differences between hot and cold wallets, let’s understand some basics first. So let’s take a look at the fundamental terminology of hot and cold wallets.
A hot wallet is one that is connected to the internet and is used to buy stuff online. However, since it’s operated on an online exchange it’s prone to network-based theft. A few examples of hot wallets include Coinbase, blockchain wallets.
A cold wallet is one that is not connected to the internet and is more secure in comparison to a hot wallet.
A few examples of cold wallets include hardware wallets (like Ledger Nano S) and paper wallets (like https://mycelium.com).
After learning some fundamental terminology, let’s look at some Pros and cons of both these types of wallets.
*It’s easy to access your funds online as they’re stored in an online exchange.
*You may lose your funds forever if they get hacked.
*Super efficient for storing huge amounts of crypto in a secure manner.
*There have been very few instances of theft recorded about these devices.
*Prone to getting misplaced, stolen, damaged, etc.
*You cannot rely on them for making your daily and microtransactions.
What are the different types of wallets:
Even though, bitcoin wallets are available in a lot of forms: Desktop, mobile, web and hardware are the 4 main types of wallets.
Desktop wallets: They’re operated through a desktop and allow its owner minuscule levels of control over their funds. In my opinion, they aren’t the most secure way of storing your crypto-coins as they are prone to get hacked. Therefore, I recommend you to stay away from them.
A couple of examples of these types of wallets are as follows: Bitcoin core, Electrum, etc.
REITERATING my point they aren’t a safe heaven for your cryptocurrencies and that’s why you should stay away from them.
Mobile wallets: These types of wallets function on your respective smartphones, iPhones, etc.
They’re a lot safer than desktop wallets also providing full ownership to you over your funds. Examples: Coinomi, Jaxx, blockchain, coin payments & coinbase ( mobile apps ).
A word of both concern and caution is to do your research before you choose a device in which you’ll be keeping your blood, sweat, and coin.
This option over here is by far the king of safety when it comes to keeping your crypto-coins safe. They allow you to store your coins in a physical device usually a usb-drive. You can connect them to your laptop, desktop, etc, and then access your funds offline.
Their specialty is that they’re immune to virus malfunctions.
Also, there have been very few instances of fraud reported against these devices.
They allow you to print out a tangible copy of your public and private keys on a sheet of paper for offline storage. They’re a type of cold-storage as they allow you to back-up and secure your funds ( i.e. your public and private keys ) in an offline manner.
What are the advantages & disadvantages of each type of wallet:
- You can use them via your desktops and they offer you complete ownership of your funds.
- Easy to set-up and use.
- Accessible from any device with an internet connection.
- Are linked to crypto exchanges online.
- They’re prone to cyber hacks and you could lose your funds forever.
- Your private keys are stored on someone else’s server. Not good at all for you and your funds.
- The website could shut down and run away with your funds without providing you a prior notice.
- It’s subjugated to technical difficulties.
- The website has complete control over your funds. Again, not so cool.
- A safer alternative to desktop wallets.
- Easy to set-up and can be accessed anywhere, anytime.
- All you need is an internet connection to be able to access your funds through your preferred mobile app.
- Far more convenient for backing up your funds as compared to desktop and web wallets.
- You have complete control over your cryptocurrencies.
- If you lose your device then bye bye my funds. I’ll miss you okay.
- Even though they’re a safer alternative, there’s a possibility that your account could get compromised.
- It’s the safest and most efficient way to store your funds in an offline manner.
- There’s either zero or a tiny possibility of hacking your funds.
- Easy to back up and is password protected.
- It isn’t free and costs 70-150$.
- If you don’t behave responsibly then you’ll lose both your device and your funds. So, no misbehaving children. Okay. Be good boys and girls.
- You have a greater degree of control over your funds because you can store your public and private keys on paper offline.
- A better alternative to desktop and mobile wallets as backing-up and securing your funds (i.e. your public and private keys) is done offline on paper.
- You can use this without requiring an internet connection.
- It can get damaged, stolen, misplaced, etc.
- Making multiple copies for extra protection could backfire if someone finds out about them.
What is a deep cold storage:
A cold storage means that you’re looking to hoard your favorite coins in an offline manner. However, the private keys associated with this process may have been exposed somewhere on the internet during the signing up process. So, there’s a possibility of a compromise.
But a deep cold storage means that not only are your bitcoins or altcoins stored offline but also the system storing your cryptocurrencies is not operated in an online manner. Now what this means is that the signing up process and private keys were generated in an offline fashion. Everything from the generation of private keys, to storing of crypto, to the signing of transactions, etc, is done offline.
Maintaining the required back-up and keeping your funds secure:
I assume everyone reading this post is smart enough to perform his or her independent research before choosing a wallet in which they wish to store their blood, sweat, and coin.
Still, I’m going to list a couple of points that will help you guys maintain the right type of back-up and security of your hard earned crypto.
And with that here we go …
- If you intend to day trade in crypto then a combination of software and hardware wallets ought to help you out.
- The reason for this is that software wallets can help you trade and hardware wallets can help you store your daily earnings.
- If you want to hold on crypto then a Hardware wallet like ledger nano s will work wonders for you. The reason for this is that they offer security and convenient backing up of funds.
This feature seems to be lacking in terms of quality concerning software/mobile and desktop wallets.
- If only safety is your concern then again nothing seems to beat hardware wallets.
And with this, it’s a wrap for this post. Thank you so very much for reading through until the end. Please remember to follow us on your social media accounts Facebook
. And for your coin related information, you can always rely on Coingyan because delivering accurate information in an interesting manner is our motto for every member as well as non-members of our community. I’ll take your leave for now and be back with another interesting post soon. Till then have a nice day and keep on learning and earning my “Coiners”.