5 Types of Cryptocurrency Wallets

Protecting your cryptocurrency is paramount in a digital currency world. Cryptocurrency exchanges have helped develop a secure way for users to access cryptocurrency without leaving exchanges wide open to hackers. With a cryptocurrency wallet, you have another layer of protection between hackers.

What makes cryptocurrency wallets so important is that they don’t house your currency, but your private keys to access that currency from the blockchain. This is what hackers are looking for, which makes your cryptocurrency wallet incredibly vulnerable. Choosing which type of wallet to store your cryptocurrency comes down to a matter of security, convenience, and compatibility.

Understanding Private Keys

Cryptocurrency serves as a medium of exchange that is secured through cryptography. Accessing a crypto coin is only possible with the private key given to you at the time of transaction. This key represents your block in the blockchain or public ledger.

Without the private key you can’t access your cryptocurrency. This is why private keys are stored in secure wallets and why wallets are the source of numerous hacks across the cryptocurrency world.

Hot and Cold Wallets

A wallet that stores cryptocurrency keys online or on a device with regular internet connection is considered to be a hot wallet. On the other hand, a cold wallet is considered to be a wallet that stores private keys offline.

A cold wallet can come in the form of a physical printout of a blockchain key or an offline backup on a hardware device. Cold wallets are considered more secure than hot wallets, but are less convenient. Some cold wallets also require software to convert a private key back to digital form.

5 Types of Wallets

Web Wallet

A web wallet store private keys on a public server. The earliest form of this was from Bitcoin’s very own exchanges. All you need to do is sign up for their services and there’s typically no fee involved. Online wallets host the advantage of providing easier access to cryptocurrency transactions.

Unfortunately, web wallets are susceptible to phishing scams and hacks. Depending on where your web wallet is being hosted, it could be considered the least secure option for storing your cryptocurrency. For this reason experts suggest using web wallets for small purchases only.

Desktop Wallet

Desktop wallets offer a little more security for your cryptocurrency. Private keys are no longer hosted on a third party server and computers could be used as a cold wallet storage, if they’ve had no prior contact with the internet.

With access to secure TOR networks, desktop wallets provide fast and secure access to cryptocurrency exchanges. Unfortunately, desktop wallets are still susceptible to malware scams and viruses that could infect your entire cryptocurrency reserves.

Mobile Wallet

Mobile wallets operate generally the same as desktop wallets, except they are accessible from a mobile device or application. Considering how insecure mobile devices are, a mobile wallet could leave your cryptocurrency in peril from malicious hackers.

Always backup private keys offline in case your device becomes compromised or you lose your data. A mobile wallet offers some unique features, such as a QR code scanner and access to TOR networks to conduct more secure transactions.

Hardware Wallet

Considerably safer than a hot wallet, a hardware wallet stores private keys in an offline backup that can be directly uploaded to a mobile or desktop device. This hub serves as the ideal storage center for your cryptocurrency portfolio.

A hardware wallet is a USB device that generates unique private keys during cryptocurrency transactions to be stored on its hard drive. A hardware wallet can be password protected and require two-factor authentications, making them nearly impossible to hack. This is considered a cold wallet because it stores private keys offline.

Paper Wallet

Finally, the most cybersecure wallet available remains the paper wallet. The ultimate in cold wallet storage, paper wallets are literal paper printed keys that you can physically hold. Be sure to find an online cryptocurrency service that will allow you to print wallet keys onto a custom designed paper wallet service.

Of course, paper wallets are susceptible to water damage and decay. It’s key to create multiple backups so that you don’t lose all of your cryptocurrency the next time you misplace a small piece of paper.

Final Thoughts

No wallet is perfectly secure. Cryptocurrency is a hot target for thieves and hackers who can steal from you without any warning. Ideally, a hot wallet should be used for small, short-term transactions, while a cold wallet should serve as a secure bank account that’s only access when needed. In the digital era, stealing cryptocurrency is perhaps easier and more profitable than ever before.

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