What types of cryptocurrency wallets are right for you?
Cryptocurrency wallets are an integral part of using Bitcoin and another cryptocurrency process, as it is one of the essential parts of the infrastructure that makes it possible to send and receive money through blockchain networks. Each wallet type has its advantages and disadvantages. It is essential to understand how it works before using it to store your digital currencies.
Here is a comparison of the different types of wallets that are used to store cryptocurrencies, and which one is right for you, noting that depending on the amount of cryptocurrency you have at your disposal, the methods for choosing the wallet in which you want to store your digital currencies will differ.
What is a cryptocurrency wallet?
- It is a tool that you can use to interact with a blockchain network, and there are many types of encryption wallets that can be divided into three groups: (software), (hardware), and (paper wallets) paper wallets. It is also called Hot Wallet or Cold Wallet.
- The majority of investors rely on Software Wallets, which makes their use more convenient than Hardware Wallets. However, hardware wallets tend to be the safest alternative. On the other hand, (paper wallets) consist of a wallet printed on a piece of paper, but its use is now considered outdated and unreliable.
- These wallets can also be classified as (hot) hot or (cold) cold according to the way they operate, and (hot wallets) are any wallets that are connected in some way to the Internet, while (cold wallets) do not have an internet connection, instead, they use a medium Physically for storing keys offline, which makes them resistant to hacking attempts online.
How do these wallets work?
- Contrary to popular belief, these wallets do not really store cryptocurrencies, instead, they provide the tools necessary to interact with the blockchain network, in other words, these wallets can create the information needed to send and receive cryptocurrencies via blockchain transactions. From one or more pairs of public and private keys.
- The wallet also includes an address, which is an alphanumeric identifier that is generated based on public and private keys, and this address, in essence, is a specific location on the blockchain network to which coins can be sent, and this means that you can share your address with others to receive money, but it should never be disclosed. For your private key to anyone.
What are the types of wallets Cryptocurrencies:
1- Software Governor:
- Software wallets come in many different types, and each has its own unique characteristics. Most of them are connected in some way to the Internet and then are among the (hot wallets), the most common and important of which are: (Web wallets), which allow investors to access these wallets via the Internet. Through internet-connected devices such as: computers, smartphones, tablets, desktops, and phones.
- And (desktop wallets) Desktop Wallets, which are a safe alternative to storing cryptocurrencies, and they are programs that you can download to your computer and will be able to fully control the wallet, as desktop wallets act as an address for the user to send and receive cryptocurrencies, and they also allow the user to store private keys Each user has them managed, so there is less risk of being hacked.
- While (mobile wallets) mobile wallets work in a way much like their counterpart from desktop wallets, but they are specially designed as applications for smartphones, and they are very convenient because they allow you to send and receive cryptocurrencies through the use of QR codes.
- As such, mobile wallets are particularly suitable for making daily transactions and payments, making them a viable option for spending Bitcoin and other cryptocurrencies in the real world.
- However, just like computers, smartphones are vulnerable to malware and viruses, so it is recommended that you encrypt your wallet in the phone with a password, and backup your private keys or initial phrase in case your smartphone is lost or broken.
2- Hardware Governor:
- They are devices specially designed to store digital keys and are among the types of (cold wallets) Cold wallets, and these wallets provide the most security because they are separate from the Internet, so your digital currencies will be less vulnerable to attacks online when you are not connected to the Internet.
- However, this method of storage is difficult to use and access at times, so when stored in the short term it is not recommended such wallets, in addition, these devices can be very expensive, however in most cases, it may be worth it especially if you are investing In large quantities of cryptocurrencies.
So which one of these portfolios is right for you?
You should consider using hardware wallets if you plan to keep your cryptocurrencies for a long time or if you keep large quantities of them, as many of these wallets allow you to set a personal passcode (PIN) to protect them, in addition to To the recovery password which can be used in case you forgot the passcode.