Cryptocurrency is the oil of the contemporary time which makes it crucial to safeguard it at all costs. Thus, users use a crypto wallet that acts as a tool to interact with any blockchain network. It also helps them to store their private keys and digital currency along with carrying out transactions and monitoring the overall balance.
Crypto wallets are generally categorized into three groups:
- Software crypto wallets
- Hardware crypto wallets
- Paper wallets
Moreover, they are also classified into cold wallets and hot wallets as per their working mechanisms. Although some people consider hardware wallets to be the most secured ones, one can find hundreds of software wallets on the internet due to their increased convenience.
How do crypto wallets work?
To your surprise, it is known to very little that crypto wallets do not store cryptocurrencies in reality. Instead, they provide tools to the user to interact with a blockchain and carry out necessary transactions. One can also say that cryptocurrency wallets generate information to send or receive crypto via numerous blockchain transactions.
In addition to this, crypto wallets also consist of addresses to private and public keys. The address has a specific location on the blockchain to which coins are sent or received. Thus, users should always avoid sharing such crucial details of their crypto accounts with anyone else to prevent theft or hacking.
Moreover, users can use their private keys to gain access to their accounts on any device. Thus, you can use an Android, iOS smartphone, Windows, Mac, or Linux, etc to recover your funds easily.
Hot vs. cold wallets
Depending on the fact that whether the crypto wallet stores its data and digital assets online or offline, one can distinguish between hot or cold wallets easily.
Cold wallets store their data and tokens in offline mode using a hardware wallet. They provide the maximum level of security to users since the private key remains in a USB-shaped device in the user’s hands. Thus, no one without the private key can gain access to your stored crypto or install malware to infect everything.
Hot wallets, on the other hand, store their private keys online using the internet connection. They are more convenient, easy to set up, and users can gain access to their crypto accounts through various platforms and different devices. Some wallets are capable of accepting up to 100 different cryptocurrencies whereas others like the tezos online wallet work only with Tezos.
Types of hot wallets
- Desktop wallets- As the name suggests, desktop hot wallets run on desktops or laptops only. They safeguard your private key with greater functional ability. However, many people prefer other wallets over desktop crypto wallets since these are vulnerable to computer viruses and other malware attacks.
- Mobile wallets- Mobile wallets are commonly used throughout the globe since they are user-friendly and more efficient. Nowadays more crypto wallets are being introduced for both iOS and Android users which is a win-win situation for everyone.
- Online wallets- Online wallets are web-based wallets that require having trust in a third party. They are highly renowned for their increased convenience as you can access them from any part of the world. One such great example is the tezos online wallet that helps the user in storing, managing, and transferring Tezos.
It is always advised to consider different factors such as the capacity and available functions before choosing any crypto wallet. They are an integral part of the crypto world and each of them has its advantages and features.
