admin,February 12, 2018
What is Cryptocurrency Wallet?
Interested in trading or investing some coins in digital markets? In order to use your coins, you need to have a cryptocurrency wallet. In the simplest form, cryptocurrency wallet is an application that stores or holds onto your cryptocurrency. It’s a secure digital wallet used to store, send, and receive digital currency such as Bitcoin, Ethereum, etc. Most cryptocurrencies have an official wallet or a few officially recommended third-party wallets.
Instead of storing coins or currencies, cryptocurrency wallet stores keys. A private key is a secure digital code known only to you and your wallet. The private key is stored that shows ownership of a public key (a public digital code connected to a certain amount of currency). So your wallet stores your private and public keys, allows you to send and receive coins, and also acts as a personal ledger of transactions. In fact, currencies don’t get stored in any single location or exist anywhere in any physical form. All that exists are records of transactions stored on the blockchain. To be specific this is how cryptocurrency wallet works, If private and public keys match the balance in your digital wallet will increase, and the senders will decrease accordingly. There is no actual exchange of real coins. The transaction is signified merely by a transaction record on the blockchain and a change in balance in your cryptocurrency wallet.
Cryptocurrency Wallet Types?
There are several types of wallets that provide different ways to store and access your digital currency. Wallets can be broken down into three distinct categories – software, hardware, and paper. Software wallets can be a desktop, mobile or online.
- Desktop wallets offer one of the highest levels of security however if your computer is hacked or gets a virus there is the possibility that you may lose all your funds. Desktop wallets are downloaded and installed on a PC or laptop. They are only accessible from the single computer in which they are downloaded.
- Online wallets are the most convenient because we can access it everywhere at anytime, but also the most vulnerable for the same reason. While they are more convenient to access, online wallets store your private keys online and are controlled by a third party which makes them more vulnerable to hacking attacks and theft.
- Mobile wallets run on an app on your phone and are useful because they can be used anywhere including retail stores. Mobile wallets are usually much smaller and simpler than desktop wallets because of the limited space available on a mobile.
- Hardware wallets differ from software wallets in that they store a user’s private keys on a hardware device like a USB. Although hardware wallets make transactions online, they are stored offline which delivers increased security. Hardware wallets can be compatible with several web interfaces and can support different currencies; it just depends on which one you decide to use. What’s more, making a transaction is easy. Users simply plug in their device to any internet-enabled computer or device, enter a pin, send currency and confirm.
- Paper wallets are easy to use and provide a very high level of security. While the term paper wallet can simply refer to a physical copy or printout of your public and private keys, it can also refer to a piece of software that is used to securely generate a pair of keys which are then printed.
How to secure your Cryptocurrency Wallets?
Important note about using a digital wallet is to never share your wallet password or private key. Also never enter your password or private key anywhere, unless you are accessing your wallet via private key and password. To send coins and receive coins you only need to share your public wallet address or your public key. This of course only applies to wallets where you control your keys directly. If you use a custodial wallet, then use two-factor authentication and don’t share your password.
Besides keeping your keys secure, you also need to remember to never trust mining or wallet software that comes from a source that you don’t know and trust.
There are some tips to keep your crypto wallet secure. Do not forget to backup your wallet, by only storing small amounts on your digital wallet and keep the rest in the higher security environment. It’s smart to backup your wallet and private keys and to encrypt them. At least one backup should be on a CD or thumb drive to ensure that you have a “hard copy” laying around. If you lose your wallet or your keys, then you lose the currency connected to it. Always stay cautious to update your wallet software, so that you will have the latest security enhancements.