A Complete Guide to Cryptocurrency Wallets

Cryptocurrencies have started to gain prominence in recent days. They are backed by blockchain technology. The decentralized nature and the associated reduction in the cost of transactions have contributed to the growing popularity of cryptocurrencies.

Any currency that is used for a transaction requires the balance to be monitored, in addition to the facility to send or receive digital currency from other users. It is for this precise purpose that you will need to have a cryptocurrency wallet.

What is a Cryptocurrency Wallet?

The very mention of the word ‘wallet’ makes us think about a physical place where currency can be stored. However, cryptocurrency wallets are different. It would be surprising to know that these wallets do not store any currency.

These wallets story access to the currency. In the technological jargon, a cryptocurrency wallet is described as a daemon. The access to the wallet is controlled by a couple of credentials - the public key and the private key. The public key is the ‘address’ to which others can send money to. The address, as the name implies, will be visible to everyone you send money to.

The private key functions as a password, and it is to be kept a secret.

==>What to Look for in a Cryptocurrency Wallet?

Different Types of Cryptocurrency Wallets

Cryptocurrency all exams broadly classified into two types, the hot wallet, and the cold wallet.

• A hot wallet is the kind of wallet that is connected to the internet. It is one of the easiest ways to transact and trade using cryptocurrencies.
• A cold wallet, as the name implies, is more of ‘cold’ or ‘frozen’ storage. If the hot wallet can be compared to your actual wallet, the cold wallet is comparable to your bank savings account. 

Both these wallets come with their own share of advantages and disadvantages. Blockchain developers around the world have been steadily working to make these wallets better both in terms of functionality and security.

==>Read DetailedArticle here: Types of Crypto Wallets 

The Other Classification: 

Based on the device from which they are accessed, wallets can also be classified into desktop wallets, mobile wallets, online wallets, hardware wallets, and paper wallets.

Desktop wallets are one of the most common types of wallets for beginners. They are, however, confined to the desktop device from which they are accessed. This presents a small hindrance to universal accessibility.

Mobile wallets are pocket and access-friendly. However, they are only as physically secure as a mobile device. This would mean that if the mobile is lost, so is the wallet.

Online wallets run on a cloud. This would mean that they can be accessed from anywhere using any device. However, it is to be noticed that the ‘cloud’ is controlled by a centralized third party. It makes even your private keys susceptible to hacking attacks.

Hardware wallets resemble a USB drive. These wallets give the flexibility of movement and the security of the cold wallet. The hardware wallet is online only when it comes into contact with a computer. Once the transaction is done, it can be put back into your pocket, without any loss in security.

Paper wallets, although they might sound classical, are one of the most secure wallets. The public and private keys are printed in the form of a QR code. If you plan to keep your money stored for extended lengths of time, this should be your preferred wallet.

==>Read More About Paper Wallets the Offline Cryptocurrency

How to Keep Your Wallet Secure?

Securing your wallet is one of the most important aspects that you’ll need to pay attention to. Since there is no centralization, there is not much of a chance for centralized policing or dispute-redressal as well.

It is a good idea to backup your wallet, and not hold all the money in your hot wallet. If you possess big volumes of cryptocurrency, it is better to have a considerable amount of that in your cold wallets like hardware or paper. It is to be remembered that any online storage might be susceptible to hacker attacks.

Keep both your PC and your wallet updated with the latest software. The updates might contain important security patches that will protect you against the latest kind of attacks. This small click goes a long way in protecting your crypto funds.

Follow the usual security best practices. It is advised to set up long and complex passwords (maybe use special characters) that are difficult to crack. It would also be good to set up two-factor authentication. You can also consider using multi-signature (multi-sig) wallets. They need authentication and authorization from more than one entity to carry out a transaction.

The Commercials 

The very reason cryptocurrencies came into being is to do away with the centralization and transaction fees involved. Generally, there is no fee for transacting between crypto wallets. However, for the sake of paying miners, a negligible amount is charged - as low as 12 cents for 226 bytes of transaction.
There is a democratic dimension to this as well. You might quote an amount that you are willing to pay. Based on that amount, and in line with the availability of miners, the transaction might take time.

Choosing the Right Wallet for You

Which wallet is the best one? There is no one-size-fits-all answer to this question. You will need to ask yourself a few questions before you arrive at the right one:

1. How frequently will you be using it? 
2. Where (all) will you be accessing your funds from?
3. How many currencies do you handle? 

Based on the answers to these questions, you’ll be able to arrive at the right kind of wallet for you!

==>Build Your Own Cryptocurrency Wallet - Protect Your Cryptocurrency

A Few Examples 

Bread Wallet (Mobile Wallet) - It is one of the easiest-to-use wallets. It is available on Google Play and on the App Store. It does not incorporate a server.

Atomic Wallet (Multisig Desktop Wallet) - This wallet is available as a desktop client and it supports more than 300 coins. It is available for all major operating systems - Windows, OS-X, and Ubuntu. This wallet supports atomic swaps, a highly secure and swift way to transact.

Ledger Nano (Hardware Wallet) - The Ledger Wallet Nano looks like a USB drive. Being a hardware wallet, it brings in a lot of security aspects like the second security layer to avoid attacks.

==>5 Things You Should Definitely Include In A Cryptocurrency Wallet

Conclusion 

It would not be an exaggeration to say that it is these wallets that have made cryptocurrencies accessible and tradeable. There might be issues with security and accessibility, but they are bound to be corrected and perfected in the near future. Should you have a requirement to create your own cryptocurrency wallet, you can get in touch with the experts at Blockchain App Factory.