Crypto wallets: some facts to protect your funds

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Every crypto user has probably wondered how crypto wallets work. Properly understanding these wallets and their purpose is as important as the coin purchase itself. The concept is simple, and the term “crypto wallets” is pretty self-explanatory to some extent. But what if we told you that strictly speaking, crypto wallets don’t
Actually store crypto? (That’s right, they don’t)

Investors should also take the time to compare the different types of crypto wallets available in the market. Crypto platforms like
CoinSwitch allow users to store their funds in their app, a feature similar to an online crypto wallet. But what makes them different and when to use them?

Fact check: What is a crypto wallet?

In ordinary life, most of us store our money and cards in a wallet to keep them safe. Likewise, many crypto investors are discovering that to protect their assets, they need to store them in a safe place. But this is where the difference between our real and virtual lives comes into play:

Technically, crypto wallets
don’t store your crypto. Your assets live on the
block chain and accessible only with a key. And that’s where they stay. Crypto wallets simply keep your keys safe so that only you can access them to complete a transaction. The keys are something like the PIN codes for your debit and credit cards; they prove ownership of digital currency and allow only verified users to transact.

So basically, a crypto wallet is software that allows users to interact with blockchains, allowing them to make purchases and sales. It also allows users to view their account information and monitor their portfolios.

Features of a crypto wallet

If knowing what wallets are for hasn’t already convinced you to seek one out, here are some features of a crypto wallet that might make you think again.

  • Self-ownership: With a private key that only you can access, you are the undisputed owner of everything in your wallet. It’s a great way to secure your property rights without involving third parties.
  • Easy to use: Easy access is an especially crucial factor for everyday cryptocurrency users, and wallets will certainly make your life easier on this front.
  • Accessibility: All you need is to be anywhere with an internet connection and you can keep building your crypto.
  • Offline storage option: Some crypto wallets work offline. The upside is that these wallets, especially hardware wallets, are generally impervious to cyberattacks. Some of them remain safe and secure even if exposed to a virus infected computer.

Types of Crypto Wallets

There are different types of
wallets which can be used for blockchain transactions, each with its own purpose. They are generally categorized into hot or online wallets and cold or offline wallets. Since there are no one-size-fits-all crypto wallets, it’s a good idea to review the different types available before making a choice.

Special ET Spotlight

Hot wallets

Hot wallets are connected to the Internet and are mainly intended for daily users. They are easy to set up and you can access them from anywhere with an internet connection. But this comes with security risks, because if your hot wallet is hacked, you risk losing all your assets.

Types of hot wallets:

1.Desktop Wallets: These wallets come in the form of downloadable applications for use on desktop or laptop computers. The application allows you to generate a data file that will contain the private keys.

Examples: Exodus, Bitcoin core and Electrum.

2. Web wallets: As the name suggests, you can use this type of wallet through a web browser without having to download any software or app.

Example: GreenAddress, a Bitcoin wallet.

3. Mobile wallets: These wallets are basically apps for your smartphone that can be used to exchange funds.

Example: mycelium.

cold walletSpecial ET Spotlight

Cold wallets

Cold wallets are considered more secure because they are only connected to the internet during transactions. They come in the form of hard drives and USB devices. Although relatively safer, cold wallets also have some disadvantages. If you damage your cold wallet device or forget your key, you will not be able to access the hard drive and risk losing your assets forever! And those hardware can be expensive.

Types of cold wallets

1. Paper wallets: A paper wallet is simply a printed sheet of paper containing both your private and public keys, accessible via a QR code.

Example: MyEtherWallet.

2. Hardware wallets: A type of cold storage device that stores the user’s private key in a secure hardware device.

Example: Ledger and Trezor.

crypto securitySpecial ET Spotlight

Storage options on exchanges: are they safe?

While it is convenient to store coins on the exchange where you purchased them, crypto wallets are safer and more secure, especially if you plan to hold your crypto assets for a period of time (HODLing). It’s best to take a call on which to use after deciding whether you plan to do short-term trading or HODLing. In any case, your decision will also depend on the exchange you use, as some do not offer you the storage option at all.

Conclude

Crypto wallets are a great investment. But if you are new to investing and feeling overwhelmed by all these options, you can always start with a crypto platform like
CoinSwitch; the app will allow you to store your assets there while you take your time exploring the various crypto wallet options available in the market.

Warning
: The above content is non-editorial and TIL hereby disclaims all warranties, express or implied, in connection therewith. TIL does not necessarily guarantee, endorse or approve any of the above content, and is not responsible for it in any way. The article does not constitute investment advice. Please take all necessary measures to ensure that the information and content provided is correct, updated and verified.

Crypto products and NFTs are unregulated and can be very risky. There may be no regulatory recourse for any loss arising from such transactions.

For any questions, write to
support@coinswitch.co

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