Before we get into the explanation, think about how you keep your real money. Hardly anyone walks down the street with a bundle of bills in their hands, right? Instead, chances are you keep them in a leather wallet, bag, or even a piggy bank!Conveniently and safely, you can store cryptocurrency online btc wallet.
Whatever your method, you try to store them in the most secure and convenient place for you. Cryptocurrency wallets follow the same principle.Using a wallet for cryptocurrencies, you get the opportunity to store, receive or send Bitcoins, as well as other cryptocurrencies (today there are about 2,000 of them!). We can say that this is the same wallet, but only in digital format.Perhaps now it is not entirely clear to you what it is, so let’s take a closer look at the work of such a wallet.
How Does a Crypto Wallet Work?
In the section above, I used the leather wallet example where you store your cash. However, in the digital world of cryptocurrencies, thanks to blockchain technology, things are a little different.Cryptocurrencies are not actually stored in your physical wallet as they only exist digitally. Instead, the blockchain consists of records that show which private and public key owns certain funds.The wallet address is like your bank account number. There is no harm if someone knows him, as he is used to receive funds from other people. This could be your employer sending you a paycheck, a paying customer, or friends and family looking to send money as a birthday present!In the world of cryptocurrencies, if someone wants to transfer coins to you, you just need to give them your wallet address. As in the real world, there are no two identical bank accounts, and in the world of cryptocurrencies there are no identical addresses. Each of them is assigned to a specific person. Also, there is no limit to the number of wallets you create.
What Are The Types Of Cryptocurrency Wallets?
There are several different types of wallets and the choice of one depends on your needs. Basically, different wallets offer different things, like additional security, convenience, or functionality. Let’s take a look at some of them.
Software wallets are downloaded to a laptop or computer and can be accessed from that specific device. Overall, these types of wallets offer a good balance between security and convenience. Although there is still a chance of hacking such wallets, and much depends on the security of your device.
A mobile cryptocurrency wallet is very similar to a software wallet, as it is downloaded to your mobile device. You usually get access to your wallet by downloading a mobile app that allows you to spend coins in physical stores, for example by scanning a QR code.
Online wallets offer the highest level of convenience for transactions, however, they are also the most vulnerable. More often than not, the online wallet service provider has complete control over it, so you are effectively relying on its security.An example of an online wallet would be your account at a cryptocurrency exchanger or exchange. The exchanger will store your coins on its servers, and in the event of a hack, attackers will gain access to all your funds. Therefore, it is recommended to store only small amounts of money on this type of wallet.
Paper wallets are the most underrated options for storing cryptocurrency. You just need to generate your public and private keys using a special service, print on paper — and you’re done, your funds are protected!
The reason is pretty simple. Your keys will not be available on the network, so no one can access them until they see the data on the physical copy! If you need to transfer funds, you will need to enter the keys into the cryptocurrency software wallet and start using them as you please. This type of wallet is most suitable for long-term storage of a large amount of cryptocurrency!
In terms of security, they are marginally better than software wallets. It is a special physical device whose sole purpose is to store your private and public keys.The device only connects to the Internet when transactions are required. However, in this case, you enter the code directly on your device, which makes virtual hacking almost impossible for a hacker.