Understanding Cryptocurrency Wallets: Why You Need To Understand Them!

Digital money has now become a revolution in the technology that let people, institutions and organizations transfer funds instantly and securely without the need of any middleman.

Also, the e-currency support financial inclusion and can transform the way we shop, save and trade. While the digital currency was created to provide full control to the people to manage their money, do people really have control over their own money?

Technically not!

The digital coin currency that you own is nothing but a promise by organizations to give your money back when you will need it. Till then, it becomes the organization’s asset to use.

However, you can avoid this, and store this money in the Crypto wallet!

Table of Contents

  • 1 What Is A Crypto Wallet?
  • 2 How Does The Wallet Work?
  • 3 Different Types Of Wallets:
  • 4 Are The Wallets Safe And Secure?

What Is A Crypto Wallet?

A crypto wallet is digital software that stores private and public keys or a pair of keys to let you send or receive coins through blockchain. Also, it will allow you to monitor the balance left in the blockchain.

In simpler terms, a crypto wallet is a software program that stores your digital coins and efficiently monitors your balance in the wallet. Check this out!

How Does The Wallet Work?

E-wallets are completely different from physical wallets as they don’t physically store coin or cryptocurrency itself.  Instead, the currency is stored in the form of private or public keys, or in the form of digital codes. Private keys work like the PIN numbers that help you access the wallet like a bank account.

Further, in a digital wallet, you will not send a cryptocoin, instead you’ll send the value in the form of transaction. Or in other terms, you’ll transfer the rights of your coin to someone else. For the receiver to spend cryptocoin, his private keys should match the public address that you use to send currency.

Different Types Of Wallets:

Wallets usually are divided into three categories, i.e. software, hardware and paper. Desktop, mobile and online transactions fall under software wallets while hardware wallets store user’s private keys on a device like USB.

  • Software wallets:

Desktop: These wallets can be easily downloaded and installed on the system (laptop or PC) and can be accessed only through the computer. These wallets are considered as the most secured wallets, but if your system gets hacked or attacked by a virus, there’s a chance that you might lose all your money.

Online: These wallets work on the cloud and can be accessed from any device from any location. Unlike desktop wallets, they are more accessible, convenient and store everything online. Since the third party controls them, they are more vulnerable to attacks and thefts.

Mobile: As the name suggests, these wallets run through an app from your mobile phone and are more useful. You can use them anywhere, be it shopping or a retail stores. Also, these wallets are small in size and are much simpler than the desktop wallets.

  • Hardware wallets

These wallets are different from software wallets as they store user’s private keys on devices like USB. While these wallets make all transactions online, they are stored offline which also adds security to the wallet.

Further, hardware wallets are compatible with many other web interfaces and also support different currencies. Simply decide which one you want to use, and you are good to go.

Making transactions using hardware wallets is also easy; users simply have to plug-in their hardware wallet to any internet-enabled device, enter the secret pin number and send the currency.  These wallets are easy to transact keeping your money safe and sound.

  • Paper wallets:

This is one of the easiest wallets among the three and offers top-notch security. Although the paper wallets are often confused with physical copy or printout of the wallet, its software that is used to generate a pair of keys, which later is printed in physical form.

To use the paper wallet, all you need is to transfer the funds from your software wallet to the public address that is shown on the wallet.

Moreover, if you want to withdraw money, simply transfer money from paper to the software wallet and it’s done. The process of exchanging money between the two is usually called as sweeping and can be done manually by simply using the private key. You can even use scanning the QR process to exchange funds with ease.

Are The Wallets Safe And Secure?

Well, all crypto-wallets are secure to some extent; however the degree of the security depends on the type of wallet you are using.  While online wallets are more prone to vulnerabilities to some extent, offline wallets are also safe and secure.

*Note: No matter which wallet you use, if you forget or lose the private key, you will lose all your money.

Install crypto-wallets and keep your money with you! 

Leave a Reply

Your email address will not be published. Required fields are marked *