Cryptocurrency Wallet is the undeniable application you must utilize every day when you are into the crypto world. Either you hold small amounts of ETH, BTC, LTH, or custom cryptocurrency, you need a crypto wallet to store and perform transactions with your digital assets. Professionals seek advice from experts on cryptocurrency wallet development
with customized features than utilizing pre-built software. Customized crypto wallets are believed to be safer than exchange or any third-party hosted wallets!
Now, in this blog, let’s grab knowledge on the cryptocurrency wallet and its types! You can kick-start with the favorite choice of the crypto wallet!
What is a cryptocurrency wallet?
A cryptocurrency wallet is a software application that helps users to store, send, receive, or monitor the crypto transactions. The wallet users are provided with two significant keys: Public and Private Keys. Users are prompted for private keys to authorize the crypto wallet and perform transactions. Hence, it’s solely crypto wallet user’s responsibility to maintain their private keys safe and secure. I.e., Just like your credit or debit card PINs!
You may wonder where these cryptocurrencies are stored and how the transactions process at the backend! Here’s how cryptocurrency wallet works!
How does a Cryptocurrency wallet work?
Crypto wallets possess public and private keys. No one can view or steal the cryptocurrencies from your wallet until they have access to your crypto application.
When the cryptocurrency is transferred from your wallet, you’re officially signing off the ownership of coins to the receiver’s public address of the wallet. The receiver can access the transferred crypto coins by authorizing the private keys that match the public address of the currency stored in the blockchain network. In general, every cryptocurrency transaction is stored in the blockchain network, just the ownership transfer of coins take place virtually.
You can now explore the types of cryptocurrency wallets that are available in the market!
Types of cryptocurrency wallets
Cryptocurrency wallets are majorly categorized into three types.
- Software Wallets,
- Hardware Wallets,
- Paper Wallets.
Software wallets are sub-categorized as desktop, mobile, and web wallets. Here you go with the brief onsets of crypto wallet types!
The desktop wallet provides immense security than other software crypto wallets. The cryptocurrency wallet application of desktop type can be installed and authorized only through a PC or laptop. Desktop wallets are considered as a kind of cold storage that secures your crypto assets from potential hacks. You can access the cryptocurrencies in the desktop wallet through internet connection whenever necessary, and for the rest of the period, it can be safeguarded from prying eyes.
However, you need to have a backup plan for desktop wallets as they are vulnerable to virus attacks, electrical short circuits, and other natural calamities.
The web wallet applications are accessible from anywhere on any device with your public and private keys. Exchange wallets are web crypto wallets that store user’s private keys on a hosting server. However, when you’re picking up the exchange wallets, you’re vulnerable to hacks.
Mobile crypto wallets are the most prominent type that is served on the crypto space. Crypto owners hold a minimum of their crypto coins in mobile wallets for easy accessibility and transfers of assets. They have the feature of a QR scan and pay for purchasing products from shops, e-commerce sites, and other places. Even though mobile wallets are considered vulnerable, crypto owners store a small number of distinct crypto coins for quick transactions and the rest of their digital assets in cold storage.
Hardware wallets work differently from software crypto wallets. The user’s private keys are stored in the hardware devices securely without any vulnerabilities. The user connects their hardware wallet with internet-connected devices to authorize and perform transactions in their wallet. These kinds of crypto wallets store the coins in offline mode, making it free from prying eyes.
Paper cryptocurrency wallets are physical prints of public and private keys of wallet. A paper wallet generates a pair of keys that help to access your crypto coins. However, to create a paper wallet, you must authorize a software wallet and transfer the control to the paper type by entering the public address provided. For the withdrawal of crypto assets, you must perform the operations vice versa. I.e., Paper wallet to software wallet.
The process of withdrawal of crypto coins from the paper wallets is addressed as sweeping and is processed by scanning the QR Code or authorizing it through private keys.
You would have selected the cryptocurrency wallet of your choice by now!
A pro tip for you: Always pick a software wallet and a cold storage wallet. Hold a minimal number of crypto coins in the software wallet and the rest in cold storage. Software wallets help you with easy accessibility, whereas cold wallets serve you with immense security!